My point was "do you own an apartment complex" and what does you making a profit off it have to do with this scenario (living in a house and viewing it as a good investment).
Worst Investment Ever.....
- Thread starter jag4life
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My point was "do you own an apartment complex" and what does you making a profit off it have to do with this scenario (living in a house and viewing it as a good investment).
Da_Sperm
New Member
OK, my first unit (4BR house). I rented out for $1200 per month. My mortgage, taxes and insurance was $775. I had a positive monthly cash flow of $425 per month. I was able to deduct close to $5000 on that rental property. So, that put another $416 per month in my pocket.
My new house, the P&I was $945 per month. Well, I received a $425 per month positive cash flow from the RENTER, the government gave me another $416, which totals $841. Well, I'm only out of $104 per month on my new primary residence. BUT WAIT, I get to deduct the mortgage interest and property taxes on that also, RIGHT? That deduction ran a good $6K or $500 per month. With property taxes costing me about $7K, I'm really out of $1K (or $83 per month). You add $83 to $104 and my cost to live in my new 5BR, 3500+sq house is $187. That is with ONLY ONE RENTAL PROPERTY and ONE PRIMARY RESIDENCE PROPERTY.
Do you pay more than $187 per month for your apartment?
Da_Sperm
New Member
No, but you are making me kick myself for not having one. Secondly, I guess you have to determine what a good investment to you. It may not be a good investment to some.
I wish I had one too... then I could live there and make MONEY off it unlike living in a single family house. lol
Listen J,
People buy 40, 50 & 60k cars and finance them for 5-6 years all the time.
Why not spend that same money on a house and rent it and let someone else pay the
Loan back for you, then after it's paid your profits become huge?
Now you keep asking about Primary Residence as Profit.
It depends on income.
For me my income is at a place where I need tax write offs
I don?t have kids,
Major medical
Students loans etc
Even with IRAs I was paying the gov?ment a grip every year
I?d been stupid not to buiy a house, because now I?m in the
Refund mode, with a house that has already Made me thousands,
by allowing me to keep more of my earned money and appreciated value if I sell,
or the equity if a need a line of credit.
with rent you get NAYTHING but rent receipts
People buy 40, 50 & 60k cars and finance them for 5-6 years all the time.
Why not spend that same money on a house and rent it and let someone else pay the
Loan back for you, then after it's paid your profits become huge?
Now you keep asking about Primary Residence as Profit.
It depends on income.
For me my income is at a place where I need tax write offs
I don?t have kids,
Major medical
Students loans etc
Even with IRAs I was paying the gov?ment a grip every year
I?d been stupid not to buiy a house, because now I?m in the
Refund mode, with a house that has already Made me thousands,
by allowing me to keep more of my earned money and appreciated value if I sell,
or the equity if a need a line of credit.
with rent you get NAYTHING but rent receipts
Da_Sperm
New Member
Well, I'll give you that. If you are referring to making money as "Am I getting a monthly check for it?". No, I am not. I will get my profit when I sell the house, via appreciation.
Look at it like this. Do you need clothes to wear? YES! Well, what if I said, you can buy 7 pair of jeans to wear for $100 and after 12 months, I'll buy them from you for $150. Would you go for that? YES.
OR
You could lease 7 pair of jeans from me for 12 months for $75, at the end of the 12 months, give me back my jeans and go LEASE you 7 more pair.
Either way it goes, you will need 7 clothes to wear because you can't go around NAKED. You will need to live somewhere or you will be HOMELESS. So you might as well BUY and get something POSITIVE out of it.
Da_Sperm
New Member
You can live anywhere and make money off an apartment, single family house, etc. Man, never mind.
Do this, find out who owns the property you live in. Go to their primary residence and see how they are living. 9x out of 10, they are living BETTER than the property they are renting. Why? Because you are paying for it!
Bro... I am willing to bet that they do not view that primary residence as an investment. They just wanted the house. Probably even write off the house as a LOSS on their taxes like millionaires do.
You are basically saying that you can view something as an investment if something ELSE you bought pays for it....I totally disagree.
That's like the owner of a car dealership saying his personal vehicle is an asset because the other cars he sells pay for it.
It's a tax shelter, which allows them to keep, enjoy and benefit
more from the money the renter gives them.
EXACTLY!!!!
Now define tax shelter in your words Tony...and why do rich folks like them?:read:
Everyone should love tax shelters
I want the gov'ment to tax me as little as possibe.
So that I can keep more of my earnings as opposed to giving it to
Uncle Sam
So I need to find as many deductions as I can.
Now A house/home is more than that in my opinion.
Why do you have a credit card?
Would you die if you didn't have one?
Why do you go out with women?
Would you die if you never went on a date?
Do these things make you feel a certain way?
Do these things have the potential of being beneficial?
Lot's of Elderly people should rent, but for a younger person
with more life ahead, home ownership is a way to generate wealth.
btw what part of town are you interested in?
I'll go buy something there and rent it to you.
So you know you'll be paying my loan for me right, and the property taxes?
And I'll be claiming all the tax benefits.
After you pay for it for me, when I'm old I'll sell it and
buy a condo, & keep more of my Retirement income for Remy & Viagra
So just name your location of choice and we can do business
Da_Sperm
New Member
No, I said anything you SELL is an investment. Anything you sell for more than you have paid for it is a PROFIT. What you are talking about is LEVERAGE. Using one thing to pay for another.
If I buy a pair of jeans for $20, I have invested $20 in a pair of jeans. After two years, I sell them in a garage sale for $1. I have an investment LOSS of $19.00.
If I buy a pair of jeans for $20, I have invested $20 in a pair of jeans. I put the jeans in a store and sell them for $35, I have an investment PROFIT of $15.
Again, anything you sell is an investment. Since most houses sell for more than you put in, I would consider it a GOOD INVESTMENT. That is what this thread was about. Is a house a good investment, in terms of primary residence. If it is not, then don't ever buy a house, then you will be a RENTER, not an investor.
Ahhh, you're taking me back to undergrad. I was a Finance major. Actually, if I have a beginning price, ending price and a time period (start date to end date) it is possible to calculate the Internal Rate of Return.
It can be either positive or negative. We can accurately calculate the rate of return on your car (it will be negative) just as we can calculate the rate of return on a house (most likely positive).
So, your personal home has a rate of return associated with it even if it doesn't kick off cash each month. It IS an investment. Period.
I'd love to see the calculations just for personal enrichment...regardless of whether I am wrong or right. What are the variables you would consider?
I'd figure it would include:
Purchase price
Interest
Insurance
Taxes
Maintenance
Depreciation
Sales price
Tax incentives
Cost of selling
Absolutely, you would consider all cash flows associated with the house over the designated period of time.
If I bought an item for a dollar and sold it a year later for $0.50, what is my rate of return? Negative 50% per year.
If I bought another item for a dollar and sold it the next year for two dollars, what is my rate of return? Positive 100% per year.
That's a simplified example of the internal rate or return (IRR).
In corporate finance, we use the formula to determine whether to expand the business and a lot of other things. So, obviously you can get far more complicated but the basic principles are the same.
For a more technical explanation of the IRR: http://hspm.sph.sc.edu/COURSES/ECON/irr/irr.html
Thanks... I figured that was how it works from what I remember from my finance classes.
Now tell me how you make a positive IRR from something that you continually SPEND money on until you sell it for a profit less than what you spent on it (when you include total costs)?
Better yet ... show me how you make a positive IRR from your "rent plus investing" strategy. Renting definitely produces a NEGATIVE IRR and we've previously established that most people don't invest.
The IRR is a comparison tool. When you compare the IRR of most homeowners and the IRR of renters, I'll be willing to bet the farm that the homeowners will win a substantial majority of the time.
In other words, a 0% return is better than a negative return. Due to appreciation, I believe that most homeowners are doing much better than 0%.
I never said you do. You might just lose less on one vs the other depending on your terms.
Da_Sperm
New Member
Why not include utilities? Why not include furniture? Why not include the stove, refrig? Why not include blinds and drapes? Why not include stereo and media equipment?
Some variables you listed above, you can't include because they are simply cost you will incur just for LIVING. You can't include INSURANCE because every home or apartment is INSURED, and you have to pay for it. You can't include Maintenance because you will pay to maintain house or apartment you live in.
Oh, one last bit. Did you know that the profit on the sale of a house IS NOT TAXED as long as you lived in that house for 1 year and the profit does not exceed $250K?
I just started a list... you can include whatever extra you think costs you money. If you think of it like a business you have to include every dime spent on the property. I would not include furniture and media equipment because those are not directly related to the upkeep of the property.
Thanks for that last tidbit... not that it matters much in this discussion. Selling within 1 year is basically flipping the house.
And why would you not include insurance and maintenance? Insurance is a significant cost in home ownership.
Prof K
Active Member
Yall are making me want to buy a house even more. I'm just not in a finacial place right now to do so. But everytime I pay my rent, I know I'm just flushing my money down the toilet because its not going toward my ownership of anything. I WISH I could buy a house because when you own a house, you OWN IT to do what you want with it. Buying a house IS a great investment that I wish that I could do!
Da_Sperm
New Member
Well, just like furniture, it is a cost you will incur even if you are in an apartment or house. Just like utilities, you pay utilities in an apartment, just like you do with a house. A portion of your rent pays for maintenance also.
I don't think you included cost such as (furniture, insurance, maintenance, drapes/blinds, electronics, stove, refrig, etc.) because these are cost you incur no matter where you live.
You basically include the cost that is associated with the property, less the cost of being alive (utilities, insurance, furniture, etc.). I would go as far to say it doesn't matter what the purchase price is, all that matters is the money you invested at the time of purchase.
Lets say you buy a car for $15K and you sell it five years later for $5K. Do you say you lost only $10K on the car? Or do you include insurance, property and sales taxes, registration, inspection, gas, maintenance, car washes, parking, tolls, etc? If not, then add all those expenses together and your total cost of the vehicle over 5 years would be $30K and you would have lost $25K on the sale of the car, not $10K.