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URL:  http://boards.fool.com/if-home-ownership-was-always-a-bad-investment-31228656.aspx

Subject:  Re: Home Ownership not a good investment Date:  4/29/2014  9:00 AM
Author:  2gifts Number:  74885 of 76418

If Home Ownership was always a bad investment, landlords would not exist.


I find home ownership, as in owning my personal residence, to be very different from being a landlord where you are running a business that provides housing for someone else. I do expect being a landlord to be a good investment. Otherwise, why would you be in that business? I was a landlord for 16 years, so I am familiar with this.

But I do not consider my own personal residence to be an investment. I have to live somewhere, and I can either pay rent to a landlord or pay "rent" to the bank in the form of interest. Either way, I need a place to live, and I have to pay for it, but I do not choose my personal residence based on it being an investment as I do not consider it to be one.

Real estate does not always go up. It goes up, and it goes down. Ask people down in Texas in the 1980's who couldn't sell their houses because there were no jobs there. At the very same time, I was in Boston where I watched my real estate property quadruple in value over the first 4 years that I owned it. And then it stayed at that same valuation for the next 12 years when we finally sold it.

In 1983, we used the equity from that rental to put a substantial down payment on our own single family house. Then we watched the value of that house stagnate, fall, and rise back up to what we had paid for it over the next 12 years until we sold it and moved into the current house.

I have seen the value of the current house rise to twice what we have into it, then drop back down a bit, and it's now on the rise and will most likely sell for about twice what we have into it when we sell in a few years.

So yes, we have made money in real estate, but we could have just as easily lost money. It depends on what the market is doing at the time, and you cannot always wait for a market to recover before you sell.

I do consider resale value when I am looking at a property, but I have other criteria much higher on the list.

Nobody wants to be married to their mortgage, but a modest one is a better investment than the black hole of rent (if you plan to stay 5+ years, of course).

I disagree with this statement. If you purchase a property at the height of a market, or even somewhere in the middle of a market's valuation, and then have to sell when the market has tanked, you will lose some of your principal, and you will have also paid interest over that time. It is likely that you would have been better off financially to have been paying rent over that time instead and come out with more money in your pocket.

As I said, for my personal residence, I do not consider it an investment because its primary purpose is to provide me with housing. If I want an investment to provide me with spendable money, I look to other things like stocks or even rental property.
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