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Why your house is NOT a terrible investment (or at least my house)


               
2014 Sep 5, 7:57am   43,136 views  117 comments

by Waitingtobuy   follow (0)  

I know the history of this site in terms of many being in favor of renting vs owning. My own experience with owning vs renting is different.

I live in a beach community in LA. Bought in 1999 for $329K, sold in 2008 for $620K (after renting out this place for one year to college students). At the downturn, houses here lost maybe 15% in value, tops.

Rented from 2007-2011. Burned through $180K in rent, or $3800/month.

Bought again in 2011 for $799K. My place now has an approximate valuation of $1M to $1,050,000. To rent a place similar to mine, we are looking at about $4K/month.

So in a period of 39 months, my place climbed in value (on paper, mind you) $200K-$250K (let's say $225K). I put in an additional $20K in improvements, maintenance, etc. My property taxes are $850/month, but I get nearly all of that back from the tax deduction for home loan interest and property tax deduction. My mortgage runs me $3077/month, and that amount is on a 30 year loan at 4.25%. Principal paydown each month is about $1K. Interest alone is about $2100/month.

If I sold it today, after 5% commission, I would net $175K of increase in property value. Taking out $20K of improvements and maintenance, it is now $155K. Over 39 months, that's about $4K/month in profit. Again, assuming I sold today, I am making about $1900/month ($4000/month profit-$2100/month in interest) to live here.

In the same period, I would have spent $156,000 in rent. That's a $230K swing in just 39 months! (making $74,000 vs paying $156,000) Even if I dont sell now, I will have spent $102K in interest and improvements, which is better than $156K in rent.

I've been incredibly lucky with real estate. (had some sense on buying and selling at the right time too, but better to be lucky than good)

If I stay here for the next 27 years of my mortgage, other than property taxes, I'm locked in at $3077/month + maintenance on a place that is now 13 yrs old. Who knows what $4k/month in rent will look like in 2041, but it will be a lot more than $4K!

For me, owning has been much better than renting. Each individual has a different experience. One size does not fit all.

#housing

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1   Tenpoundbass   @   2014 Sep 5, 8:41am  

Owning has been a big load off my mind.

I know the bank isn't going to come to me next year and say, my rent is going up, or they sold the place, or inform me to let Realtors in to view the place to potential buyers. If something breaks, I don't have to fight with a landlord to get it fixed. Only to have him installing the cheapest shittiest replacement that he could find, that is ugly as hell and cheap as shit.

2   New Renter   @   2014 Sep 5, 10:20am  

Bought in 2007 for just over $700k Paid a bit over $4k/mo in ITI (interest only loan)

Found out my neighbor was renting a similar house for just under $2k/mo. Realized I was paying way, WAY too much!

Short sold in 2011 for $530k eating 5% DP but did not get stuck with fed and state tax bills for the $150k in forgiven debt. That would have been at least $70k out of pocket loss on top of the lost 5%.

OUCH!

Now renting a larger, nicer house for just under $2.5k/mo.

As you say YMMV.

3   Peter P   @   2014 Sep 5, 10:41am  

Bought in 2009, ~$3K PITI. Later refinanced to ~$2400. Probably cheaper than renting.

CaptainShuddup says

If something breaks, I don't have to fight with a landlord to get it fixed. Only to have him installing the cheapest shittiest replacement that he could find, that is ugly as hell and cheap as shit.

But now every little creaking or dripping noise worries me. Could it be a leak?

Instead of dealing with a landlord, I have to deal with the plumber/contractor. Definitely more stressful than renting.

4   CrazyMan   @   2014 Sep 5, 11:08am  

I agree it's more stressful, but overall I'm glad I did it. If I could go back, I may have gotten something smaller. It's a lot of work to maintain a big house.

So, I bought a short sale in 2012, 8 year old complete rebuild, beautiful house, just shy of 3000 sq ft. I got pretty lucky, threw out a lowball offer in the middle of winter and the bank accepted it. It didn't hurt that I let the RE agent double dip. My mortgage is less than $1800 a month @ 3.5%.

Granted I live in BFE, but it's a beautiful and quiet place (most of silicon valley is a shithole imo). But, it takes a special kind of person to live up here; I grew up here and my family is here, so I'm used to it.

I work in Campbell, so my commute is not too bad.

5   Peter P   @   2014 Sep 5, 11:16am  

CrazyMan says

Granted I live in BFE, but it's a beautiful and quiet place (most of silicon valley is a shithole imo). But, it takes a special kind of person to live up here; I grew up here and my family is here, so I'm used to it.

I know it's beautiful up there. How are the roads?

6   CrazyMan   @   2014 Sep 5, 11:24am  

Roads are fine tbh. I drive Bear Creek everyday in a TT and you just get used to it. It's nothing.

Highway 9 is less windy and if you need to get to Cupertino or Saratoga it's usually faster.

They both have a reputation for getting closed for a short time if there's mud slides, but it's pretty rare. If it does happen, I just work from home that day anyway :)

I love it up there. As a matter of fact, I'm going home now :) Have a good weekend!

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