Is a home an asset or liability?

[fasternyou929]

Originally Posted by TIGGER

I was including property tax and insurance in that figure. If you paid $250,000 for your house, it's a good bet that you're going to pay a pretty penny in taxes, no?

Property taxes vary a lot from area to area, but my rate here in Wake county is 0.7%. I paid more than $250k for my house, but my taxes are still pretty insignificant. And my homeowners is less than $60/month with State Farm. Unless you live in hurricane/tornado alley, homeowners insurance is quite cheap.

And as an added benefit, you can write off the interest from your mortgage which can lower your tax burden significantly.

[Amber Lamps]

Originally Posted by askmrjesus

Because he slept in a tent once, and figured out the difference.

If you're not getting divorced, or fleeing the country, a house is an asset.

JC

Hahahaha! Good one!

[Amber Lamps]

Originally Posted by fasternyou929

Property taxes vary a lot from area to area, but my rate here in Wake county is 0.7%. I paid more than $250k for my house, but my taxes are still pretty insignificant. And my homeowners is less than $60/month with State Farm. Unless you live in hurricane/tornado alley, homeowners insurance is quite cheap.

And as an added benefit, you can write off the interest from your mortgage which can lower your tax burden significantly.

I didn't do the math but isn't that about $2,000 a year? That's not insignificant but you're right it's not a ton of money. Last house I owned, my taxes were about $3,000 per year so and it wasn't worth $250,000. Of course, I didn't have to pay taxes on every vehicle I own every year there either. Besides, you still pay half my rent in taxes and insurance....

[fasternyou929]

Originally Posted by TIGGER

I didn't do the math but isn't that about $2,000 a year? That's not insignificant but you're right it's not a ton of money. Last house I owned, my taxes were about $3,000 per year so and it wasn't worth $250,000. Of course, I didn't have to pay taxes on every vehicle I own every year there either. Besides, you still pay half my rent in taxes and insurance....

Close enough. And property taxes can be deducted when tax time comes too.

So your rent is ~$450 per month? I didn't think rent anywhere was still that low. How much more would it cost you to own a home in the same area?

[Amber Lamps]

Originally Posted by fasternyou929

Close enough. And property taxes can be deducted when tax time comes too.

So your rent is ~$450 per month? I didn't think rent anywhere was still that low. How much more would it cost you to own a home in the same area?

heck, there are tons of apts for about $500 per month. In fact, the two bedroom was about $525-550, if I'm not mistaken.

Well, that varies but most of the houses are about a grand a month...There are a lot of modular houses here, though. Most of them are crap from what I've seen and I'm in 3-4 different houses everyday, 6 days a week. I hear what you're saying but I'll never see the point in a single, childless guy like myself buying a house.

[Flexin]

Originally Posted by TIGGER

Oh I'm sure, and I was doing the "thing" where I disagree with the majority. The honest truth is that you will almost never realize your total investment in a house IMHO. Oh and I did mention "special" circumstances, right? Buying a undervalued house and repairing it as you live there is not the norm. Take my math and match it up against a new house in a typical development,for example.

They bought it for $250,000 with 20% down which put the loan @ $200,000 with a 4.5% interest rate. Forgetting about compounding, etc, you are still looking at a pay back of over $400,000 not to mention the property tax (min $6,000/year) and insurance. About $1,600 per month. How exactly do you turn a profit in this scenario, even if you do sell in 10 years? Be honest, how many people on this board own a house, that wasn't a shit hole when they bought it, that is worth more than what they owe on it? Then of those people, how many can honestly say that if they add up ALL the money that they have spent on the house payment, taxes, upkeep, etc and subtract that from the amount that the house would sell for, they would still have enough to pay off the loan and put money in the bank.

I'm not trying to say that owning a house is a bad idea, per se' but touting it as a "good investment" is ludicrous imho.

Your looking at it all wrong. First I don't pay $6000 a year in property tax. I pay less then half of that. I also pay less then $1500 a year for my house insurance and full coverage on a 04 Mazda Tribute.

You keep adding up cost for the home owner but the cost always go up for the renter. Rent does increase. If you pay for rent you pay rent till you die. Buy a house and at some point you own it. At that point you only pay to maintain or upgrade it. The renter on the other hand is still paying rent.

If you plan on staying in one spot for a long time, owning makes more since.

There is no perfect answer for everyone. Everyone is different but I think your view of owning is a bit twisted.

Lets look at two people living in the same place for 40 years.

Guy A is a renter. Some how he is able to keep the same place for 40 without an increase. Can't see that happening. $600 a month for 40 years. Thats $288000.

Guy B bought a house. He bought a small house. $100000 for 25 years. $600 for 25 years. Thats $180000.

No I didn't add in any other cost. Yes there is insurance but the renter pays it as well. The home owner will pay more but it won't be a huge amount. Some repairs will need to be done in that time as well. The roof, siding and windows will likely need replacing during that time.

The home owner will spend $108000 less then the renter. That will pay for a lot a lot of repairs and up grades. There is a good chance that there would be still money left over after when you compare the total cost between the renter and owner.

Lets say that the house didn't increase at all in the 40 years. The home owner has a house worth $100000 and the renter has dirty old shag carpet, yellow appliances and a light blue toilet.

Its all in how you look at it. Your looking for "profit". You want the house to cover all cost along the way. That can happen but if you living there your going to have cost. That doesn't matter. You have to pay to live somewhere. But with a house a percentage of that money is still yours. It goes right into the house. Your rent money goes into someone elses place. You pay for that house or help pay for that apartment. They make money every month and then get a nice chunk when they sell.

James

[Flexin]

Originally Posted by CrazyKell

Well aside from the definitions.....

personally I consider a house a liability (remember I'm not talking definitions here). A house would tie me down to one place and I don't want to be tied down. Weird view i know but that's what it is.

What did yous say? I drifted off once you started talking about being tied down.

James

[Flexin]

Originally Posted by TIGGER

Exactly my point, saying that it makes you feel good or happy doesn't make it a good investment and this damn equity everyone is always on about is only worth something if you plan on taking out a loan. I mean great, you're $20,000 to the good on your house...Are you going to sell it and buy a nice used car? Are you going to sell and use that money for a down payment on another house? When do you stop having a house payment? When you're 60, 70, 80? What about that aforementioned property tax? Some of you might pay enough in taxes to pay my rent for the year!

You can't be pro rent then talk about a home owner paying a house payment forever. Thats what a renter does and still has nothing to show for it.

And most of the people paying more in tax then you are in rent have a much bigger place. If you were to rent an apartment the same size as that home owner then you would be paying closer to what they are paying or more. You are forgetting something about property tax. It has to be paid on for every property. The place you rent is charged a property tax. They would not rent you a place for $7200 a year if they paid more then that for taxes. In most cases you will own a place for less then what a renter is paying. Its that whole business and profit thing.

James

[Amber Lamps]

Shit, I paid more for rent 20 years ago! Rent has a way of hovering around a certain amount vs average income.

Anyway, so you want to disregard property taxes all together? $2,500 for 25 years= over $60,000 . I guess that you think that his property tax will never go up, right? What about interest? At 4.5% I have him doubling his investment to about $200,000 in 25 years. Then there's repairs that I'll never have to do. Yard work that I'll never have to do.Etc. Oh and apts do replace your carpet, appliances, etc every so often and the homeowner isn't going to replace these things either, so...

I don't know, this dream where people buy a new house, live in it for over 20 years and sell it for enough to cover all the money they've spent plus some for a down on a new house is a fairytale in most cases.

[Amber Lamps]

Originally Posted by Flexin

You can't be pro rent then talk about a home owner paying a house payment forever. Thats what a renter does and still has nothing to show for it.

And most of the people paying more in tax then you are in rent have a much bigger place. If you were to rent an apartment the same size as that home owner then you would be paying closer to what they are paying or more. You are forgetting something about property tax. It has to be paid on for every property. The place you rent is charged a property tax. They would not rent you a place for $7200 a year if they paid more then that for taxes. In most cases you will own a place for less then what a renter is paying. Its that whole business and profit thing.

James

I know that, that's why I get a property tax credit every year. It's usually about a month's rent. I understand what you are saying and I realize that I was exaggerating quite a bit but in the end, I honestly feel that you are in the same basic boat either way. There are legitimate advantages to either scenario dependent on your individual circumstances and needs.