Is a home an asset or liability?

[Captain Morgan]

Unless it's somehow generating income, it's a liability. Sure, it can possibly build equity, but I don't consider it an asset until it's somehow generating income. I, unfortunately, have very few assets.

Oh, and Tigger, I bought a small house, so I'm actually paying less for my mortgage, property taxes, and insurance than I'd pay for rent each month. However, I am doing some remodeling, so I can't say for sure if I'm getting a better deal until I sell the house. The length of time I stay in the house and how much I spend on remodels and repairs will determine whether or not I'm better off vs. renting. Unless, of course, I turn it into a rental property and let someone else pay the mortgage, taxes, insurance, etc.

[pauldun170]

Originally Posted by t-rock

Ok so I guess the question I was trying to get at is a little more complex.


When you buy a home, you take on the house as an asset and the mortgage and related fees as liabilities. I think we all agree on this. Which one out-weighs the other in long term and/or short term?

The value of home ownership outweighs the cost of securing that home.

In the short term owning a home outweighs those cost and in the long term it is not even worth discussing.

We can toss in special circumstances and turn this into a pointless conversation but at the core, owning a home is better than the alternative.

This of course is about primary residences.

[Flexin]

Originally Posted by TIGGER

Are you talking profit and loss? IMHO as the a non-homeowner has always been that a house is a liability(loss)... bear with me, guys. You will almost never realize an actual profit from the sale of a house except in certain unusual circumstances.

If you buy a house for $100,000, have a 5% loan and pay to term, you will have paid over $300,000. Will you be able to sell your 30 years older house for over $300,000? Unlikely.

In that 30 years you will pay for upkeep, new roof every 5-10 years, paint, flooring, repairs, appliances, yard work/tools, etc. At least another $50,000 or more. Are you ever going to see that money again? Nope.

What if the neighborhood goes to shit? Can you just pick up and move with the max loss being under $1,000? Hahahaha yeah right.

I personally like renting, I pay $600 per month to live here total or $7200 per year vs almost double that for a house. Of course after that 30 years is up, the home owner will have a house and I won't have shit... except most likely, his wife will have a house either through divorce or death. Me I'll either have $100,000+ more shit or if I invest that money, $2-300,000 in the bank. Hmmm.... Oh well, at least his kids will have something to fight over after he's dead.

I don't know how you do roofs in your area but roofs last longer then 5-10 years hear. My roof is 13 years old and going strong.

The money you have invested could have also been invested by the home owner. So that means the home owner has the same amount from the investment and the value of the home. My math tells me the home owner came out ahead.

A neighborhood you are renting in can go to shit. Yes you can move but other areas can increase the rent because of the flood of new renters banging on their door.

If you like to move around a lot then renting would be the better option in my opinion. If not the home owner wins in most cases.

Doing upgrades doesn't cost that much. You can do things as you go. A little bit here and there. Yes that cost you money but you are doing it to change the look and/or make iprovements. Don't screw up and you maintain or increase the value of the home. Which means you can get something back for that money unless you don't sell until after that item is passed its life. If its hardwood floors they can be refinished so they maintain value for a long time.

When I bought my house it was $200-400 cheaper then any apartment. I have a yard and a garage with that. I think I made a good choice.

In the end it comes down to what makes you happy. You and I have very different math when it comes to houses.

James

[Amber Lamps]

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.

[shmike]

Originally Posted by pauldun170

The value of home ownership outweighs the cost of securing that home.

In the short term owning a home outweighs those cost and in the long term it is not even worth discussing.

We can toss in special circumstances and turn this into a pointless conversation but at the core, owning a home is better than the alternative.

This of course is about primary residences.

Stick to the definitions, Paul.

You just attempted to turn a quantitative question into a qualitative discussion.

You fail finance.

[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.

[fasternyou929]

Originally Posted by TIGGER

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.

I'm sure the majority of homeowners on this board have homes that have appreciated while they've owned them. Maybe not in the past couple years, but over the long-term.

As for the rest of what you're saying, you're going WAY out of the way to make an argument against home-ownership. But you already knew that.

Owning a home doesn't qualify as "free room and board plus money in your pocket when you move". It is, however, a better investment than paying a similar monthly fee to rent an apartment you'll never own. With few exceptions, most places I've lived in the US have had rental rates very similar to what you pay in a mortgage per sq. ft. of space. (in other words, your $1600/month calculation on a $200,000 loan at 4.5% is... inaccurate)

[Amber Lamps]

Originally Posted by shmike

Stick to the definitions, Paul.

You just attempted to turn a quantitative question into a qualitative discussion.

You fail finance.

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!

[Amber Lamps]

Originally Posted by fasternyou929

I'm sure the majority of homeowners on this board have homes that have appreciated while they've owned them. Maybe not in the past couple years, but over the long-term.

As for the rest of what you're saying, you're going WAY out of the way to make an argument against home-ownership. But you already knew that.

Owning a home doesn't qualify as "free room and board plus money in your pocket when you move". It is, however, a better investment than paying a similar monthly fee to rent an apartment you'll never own. With few exceptions, most places I've lived in the US have had rental rates very similar to what you pay in a mortgage per sq. ft. of space. (in other words, your $1600/month calculation on a $200,000 loan at 4.5% is... inaccurate)

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?

[askmrjesus]

Originally Posted by t-rock

Why do you consider the house an asset though?

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