This was brought up in another thread. Do you believe a house is an investment? Pretty simple question, complicated answer. I believe that houses are investments since the price fluctuates and can go up and down depending on market conditions. Therefore, like any investment, there is inherent risk for a total loss.
definitionally, they count as an investment. But I believe that NO ONE should buy a house BECAUSE they think it is a "good investment." It is your house. Use it. Live in it. Hope to sell it for what you paid for it. Anything else is an unexpected bonus.
If you are looking for an investment, but stocks. Buy bonds. Buy art. Buy comic books. Don't buy a house. If you buy a house as an investment, then you think of it not as living space, but as a canvas that needs "improvement" for resale. Also, I firmly believe that people who buy up multiple houses as "investments" contributed heavily to the housing bubble. Why did the price of condos in Miami Beach skyrocket? Because rich folks bought them up even though they don't live in them. Again, you want an investment, spend your money elsewhere. Think of your house as your home, first and foremost. If you sell it for a profit, hooray. But don't make that the driving force in buying a home to begin with.
that you can profit from, therefore its an investment. unless you want to live in the same house for your entire life, then it is an investment because there will be a time you have an exit strategy from it.
You have to consider the alternative. If renting is "throwing your money away", then buying a house is investing it in something.
There are several ways to look at it. And they greatly impact your life style. I have a similar opinion with Dumpy, with a slight twist. Your 1st home is not a true investment... but every piece of property you buy after is an investment. Now I have a friend who makes great money, and has moved from luxury apartment to luxury apartment (total of 7) in the past 5 years. Each year turning it over for a nice profit... BUT at the same time, it's as if the guy lives out of a hotel. Every room is white, has nothing other than 2 couches, a bed and 2 tvs. There really are several ways to answer your question, and they vary based just on how people live and want to live their lives. -Petey
Depends who is buying it and for what purpose. I agree with dumpy . . . anyone looking to simply invest money, housing is not even close to the best option out there. Anyone know historiclly what real estate increases each year . . . I think I heard it is about 5% yearly. You can put your money in a safe gov't insured bond and make more than that . . . with no risk.
by that def then anything is an investment. if i improve my education, then i can get a better job - that's an investment. if i improve my health, i can work longer and/or more often - that's an investment. if i don't die, i'll make more money - that's an investment because i can make money simply by being alive. if i sell my liver, i can make money off of it, it must be an investment too. anything there is a demand for, could be considered an investment then.
Im a realtor...Of course a house is an investment. You also just happen to live in it. I get people coming to open houses trying to be all slick about buying viewing their house strictly as investment. That is not the way to think of it. You buy it to live there, any house after that and then you can start talking about a real investment. The main things you want in your first house is one that fits your needs and is in a quality area so when the time comes you can easily sell it
Property is certainly a very sound investment, with a much higher percentage of return that 5%, if a proper plan is executed. In many cases people put the min down, and try to use the land to generate monthly payments. So lets say you want to buy a 500,000 usd building, you put 100,000 usd down (20%). After first year your investment is worth 525,000 based on your figure above. So from your example above someone would need to make a 25% return on 100,000 to match that figure. -Petey
I know many people whom consider a higher education degree an investment. Dropping 100,000 usd over 3 years better yield you a higher paying job, unless you are well off before hand. -Petey
Feel the same way. An solid investment has to be liquid. If someone offers you a contract on your primary home, and if you don't have it on the market, are you just going to pack and move? More cases not... but the opposite in lots bought after that. -Petey
Yes, it's an investment. The prices do go up and down, and generally you can sell when the price is higher than you paid if you keep it long enough. It's not likely to go to $0 like many investments, because it is backed by a real asset (land, building). Buy a $100K house with 10% down. If it goes up 5%, you made $5K on a $10K investment, minus any negative cash flow. Leverage is a good thing unless you get upside down in the property.
Houses/Property are great investments. If the population is growing you have an item that will have growing demand against it, thus increasing its value.
It's an investment (anything you spend that much money on is an investment), but it's historically been a really lousy investment. Only twice in the past 100 years has there been a time when it earned much better than the rate of inflation, which makes sense. There's only so much money that people can spend on real estate, so it can't really rise much faster in price than, say, milk or butter or a car. The two exception were right after WWII (lots of soldiers coming back and looking to start new lives) and the last 7 or 10 years (which is looking like a monumental bubble). Wondering what the price on a given home will eventually shake out to be when the market settles down? My guess is you take the price it was selling for 10 years ago, then compound it 3% annually. That we are so far removed from that price right now in most cases tells you how much of a ride we're in for. If you want to make money long-term, stocks have proven themselves for a century. And they are far easier to diversify yourself with. You can own $10k in shares in one stock, $5k in another, $15k in a third, etc. When you own a single piece of real estate as an investment, all sorts of crappy things can happen. The local economy can tank, natural disaster, bad tenants, bad roof, bad foundation, bad anything. Any one of those setbacks can eat up years of earnings on your real estate investment. Most people can afford a disaster on one or two stocks. If disaster strikes in a real estate investment, you can be seriously fucked for years to come. That's why so many people are going to get screwed in this downturn. The guy who has one or two rental properties and no other investments could lose hundreds of thousands of bucks. If I sound smug, it's because I could've been that guy. I unloaded my one rental property in 2005 for $200k. The buyer did a $120k remodel on it. It's been for sale vacant for the last year at $280k. You don't have to be a math genius to see that somebody got fucked. Buy the house you like and can afford right now. If you get tempted to upgrade it so much that it out prices everything in your neighborhood, either move, or upgrade it because it will make you happy.
You're looking at it in the way where you have to outright pay for the property. When you are paying the down payment, then monthly payments, if you are able to cover it with the monthly income generated from the lot, you are making more on your investment than the rate of inflation. Edit: Not sure how sound an investment the guy made who bought the lot from you. Value of the home was seems low for the amount of his improvements. That was not a sound buy, but others I still think are. -Petey
Oh yeah--one more advantage of stocks over real estate is liquidity. If a certain sector of stocks looks bad in your opinion, make a call or go to a website and you are done being hurt the same day. If real estate goes into the tank quickly, you are probably 3-6 months removed from unloading it. First you have to convince yourself not to ride it out (because riding it out is simpler). Then you have to evict tenants and/or spruce up the property. Then you have to market it. Once you find a buyer, they often have to get financing. Then you have to close, and the whole deal could go south for any number of reasons and you go back to finding a new buyer. Another advantage--stocks don't call you at 3 am with a burst water heater. Oh yeah, did I mention stocks average 8-10% historical return over real estate's 3-4%? It's amazing this whole bubble lasted as long as it did.
REITs are a way to invest in real estate that are liquid, and they've certainly returned better than 3-4%
