My .02c
The house you own and live in as your primary residence, is not something I would call an investment as such. I think of it as more of a forced savings plan, that you really only get to trade for other real estate. Every month you pay your mortgage, and you get a little bit of that money put into equity in your house. When you sell your house you get that savings, but typically everyone buys a more expensive house each time, as such all of that savings goes into your next place and it continues on. Hopefully by the time you retire, you have either payed it off, or you have enough equity built up that you can sell the big house you mostly own, for a smaller house, that you will completely own and some cash.
The problem I see with trubo16hatch's analogy of his parents place going from 238K to 450K in 8years is this: One inflation hasn't been taken into account, but lets just leave that off the table for right now as it really doesn't make the biggest difference. The biggest difference is that ALL of the houses in that neighborhood, have all done about the same thing. Meaning if you sell your house for 450K at that point, and you want to live somewhere close to the same area, you are still having to buy back in at 450K for about the same relative standard of living. Netting you really no gain. Which brings me back to my first point of that it is really more of a forced savings then anything. This obviously works against you if you buy a place at 400K and the economy around that area fails, and the house market drops to 200K.
Now I am not saying it isn't wise to own your own place, as a forced savings is still better then not getting anything out of it other then a roof over your head at the end of the day. That and typically when you rent, you are only allowed to do very minor changes to the place, and when you own you are free to do almost what ever you wish. Now those freedoms come at a cost, as house insurance is a fair bit more then tenant insurance, and you are now responsible for the costs of the upkeep of the house, and the property (such as shingles on the roof, or painting the fence, the furnace, the hotwater tank, ect...) At the end of the day what I hope for as a home owner, is that the property goes up enough in value to have covered all these sort of expenses, and I break even (with my gain coming from the equity I have put in).
To me an investment would be a second property, that you are putting in sweat equity, of fixing it up, and flipping it in a relatively short time, and you would see the capital gains from that as real money in your bank account, when the property is sold in short order. Or a second property that is rented, and the basic mortgage and hopefully but not always the associated expenses of the property are covered in that rent check. There buy building equity in a second property. Like the forced savings plan, but someone else is putting in the money each month. This ends up playing out in one of two ways: Either you sell the property and you get the capital gains of that equity, and whatever extra the market gives you. Or you keep renting it till the mortgage is paid off, and then you get a second income each month of the rent check minus property up keep.
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Topic: Boosting my credit score? (Read 10723 times)