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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Re: Home Ownership not a good investment Date: 4/29/2014 12:53 PM
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Perhaps, but are you investing when you make a rent payment?

Personally, I would consider that a purchase of short term accommodations with no potential for either gain or loss, nor expectation of ownership or resale. Can you have an investment with no potential for loss or gain, interest or income? At some point in time when it is no longer desirable for you to live in the home you bought, you sell it or give it to someone.

Investment: the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value. http://dictionary.reference.com/browse/investment

If someone is simply deciding that financially, it makes more sense (cash flow, total expenses, etc.) to have a mortgage payment instead of a rent payment, is it still an investment? Would an interest-only loan still qualify as an investment?

What would the terms of purchase have to do with the definition? We paid cash for our second home and I consider that a great investment, and still will be one when it becomes our principal residence.

Does the same hold true with a person that decides to lease a vehicle versus purchase? Is the later considered an investment?

Given it is the rare vehicle that is not a depreciating asset with little to no expectation of potential gains, I would say that would be a stretch. The counter argument to this would be a classic car that you expect to gain in value.

If so, does that mean I AM NOT investing when I sell a put or a call?

Heh, some may call that speculating. ;-) However, the little I understand puts and calls tells me you are investing with the good faith that you will pay if your put/call is not profitable, often backed up by other investments with the same broker. It is essentially a secured loan, correct? While you do not buy the stock, you buy the option.

I think it is the very rare person that does not hold out the expectation that over time the value of their home will increase, even if it is sold only upon their death, and/or they do not count on that appreciation to afford it. Expectation of gain may only be a very distant reason to purchase, but it is still typically there. We have been trying to sell Dad's house in NC for a couple of years now, and will lose a considerable amount of money. I still consider his purchase an investment, albeit a really poor one. Then again, he didn't ask at the time, but he sure did talk about no longer "throwing his money away."

It's a matter of semantics.

IP
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