Is home ownership a good investment?

[Walter]

My brother recently sold his family home in which he and his family have lived for 20 years. The house is an hour north of Toronto. In those 20 years the price of the house has increased on average less than 2% per year. Taking into account interest on the mortgage, upkeep, improvements and taxes he figures he is lucky if he broke even on his so-called investment. I think he would have been better off to rent and have invested his downpayment in better yielding bonds or dividend paying stocks. Home ownership isn't all it's cracked-up to be.

 

[Cannuck]

Timing is everything. I bought my current house 7 years ago and it is worth at least 4 times what I paid for it.

Real estate goes up and down so I'm not sure if 20 years is a good bracket to use. Besides, if you are like me and buy a house at 25, it should be paid off by the time you are 50 and if you live to be 70 or 80, those 20-30 years of rent free living need to be factored in as well.

My parents bought their house in 1974 for 25K. It is now worth 450K and they haven't had a mortgage payment for 15 years.

 

[TenPenny]

You should never think of your house as an investment. It is a place to live.

Thinking of housing as an investment leads to what happened in the US; everyone buys houses with the assumption that the house will increase in value, and all of a sudden they're all upside down on the mortgage.

 

[Avro]

I have made alot of money flipping houses, they are like stocks.

You have to know when to buy and when to sell.

In 2007 I made a 100 grand off a house I bought about a year earlier

I have done the same with land up north although not much profit to be had there.

I tend to hang on to it.....but man can you get it cheap.

I bought 175 acres of lake front land about a decade ago for a song....I won't tell what it's worth now...you may vomit.

Built my cottage on it and room for more.

Tenpenny is right though, your home shouldn't be considered an investment, it's your home. A place where you watch your kids grow up and spend time with family and friends.

It's not always about money.

 

[damngrumpy]

Will Rogers said it best years ago, "Buy land, they ain't making anymore"

 

[Bar Sinister]

It's like anything else, Walter. Location is important. My house is worth between two and three time what I paid for it 15 years ago. I have noticed that many areas of Ontario are bargains so far as housing is concerned, probably due to lower level of economic activity.

 

[damngrumpy]

One of the problems farmers face in BC for example is high land prices. Here for the longest
time, farmland has been valued at one hundred thousand dollars an acre. These prices are
slightly different in some areas now. Okanagan land prices are coming down but I imagine
they will drift on up again soon.

 

[wulfie68]

There are a couple things to look at, most of which have been touched on, but people always seem to forget them.

Location - my sister is a realtor, I've friends that are realtors and I've bought 3 different houses. Everytime the subject of buying or selling a home comes up, the top 3 factors are location, location, location. Why did you buy here and will others agree with your reasons when you want to sell?

Cost of rent vs mortgage, taxes and upkeep - a lot of people don't fully take this into account or they'd probably find the actual rate of return on their home is lower than they thought. Personally, while I don't think home ownership is the best thing in terms of the rate of return, it can add some peace of mind: its yours, especially once its paid off.

Timing - it seems common sense but selling when you want to vs when you have to will earn more. Selling in a recession is bad news, just as buying in a surging market will cost you a premium.

My forays into the housing market have been positive: my first home, I was in a year and was transferred by my employer (broke even in a slow market) and my second home, I was in 9 years and almost doubled my money on it(buhbye mortgages!). At this point, I am in a house I want to be in for the duration but I know things can change. I always try to keep in mind the type of neighbourhood I buy in, the proximity to ammenities, such as shopping and schools, convenience of access, etc.

 

[#juan]

You should never think of your house as an investment. It is a place to live.

Thinking of housing as an investment leads to what happened in the US; everyone buys houses with the assumption that the house will increase in value, and all of a sudden they're all upside down on the mortgage.

We bought our first house because we needed a house but it turned out to be one of the best investments we ever made. Over the years we've moved a few times and we sold one house to buy another. Our first house cost $21,000.00 and the house we live in now would likely sell for half a million. We haven't had a mortgage for close to twenty years so we have been able to buy into other investments but few have performed like our real estate.

 

[karrie]

My house is a wonderful investment, even IF I lose money on it. No one else decides what I do here save city by-laws. No one can dictate whether or not I plant a tree, grow a garden, or let it all go to hell. They can't dictate what colour I paint my kitchen, what flooring I want under my feet, or whether or not I can have a hot tub. There are few other things that provide me with that level of sanity and comfort.

 

[TenPenny]

My house is a wonderful investment, even IF I lose money on it. No one else decides what I do here save city by-laws. No one can dictate whether or not I plant a tree, grow a garden, or let it all go to hell. They can't dictate what colour I paint my kitchen, what flooring I want under my feet, or whether or not I can have a hot tub. There are few other things that provide me with that level of sanity and comfort.

Those are pretty much the reasons why I never lease cars. I don't want anyone else telling me what I can and cannot do with my car, either.

 

[taxslave]

Location is everything. I have lived in a boom town and made money off two houses and broke even on the third there. The third one was a duplex and since we lived in it free for 8 years it could be argued that it made money too. Resource towns are tricky. Timing is everything.
I would never buy a condo or town house though. Too many restrictions and you never know when one of your neighbours will burn you out.

 

[Sal]

I believe home ownership is one of the best investments one can make. You don't pay any tax on the money that you make and your home should double every ten years or so.

Even if you pay almost nothing on your mortgage, if your value doubles you are still ahead.

 

[taxslave]

I believe home ownership is one of the best investments one can make. You don't pay any tax on the money that you make and your home should double every ten years or so.

Even if you pay almost nothing on your mortgage, if your value doubles you are still ahead.

Except that unless you die you will probably need to buy another house that has also doubled in value.

 

[TenPenny]

and your home should double every ten years or so.

That is the thinking that gets people in big, big trouble.
Why 'should' your home double every ten years or so? It depends on where it is, what kind of house it is, and what the market and economy does.

 

[Cliffy]

Not to mention that money halves in value every ten years.

 

[Sal]

Except that unless you die you will probably need to buy another house that has also doubled in value.

Very true, but now I have double the down payment and my home continues to increase in value. If I had been renting I would have made nothing.

That is the thinking that gets people in big, big trouble.
Why 'should' your home double every ten years or so? It depends on where it is, what kind of house it is, and what the market and economy does.

My home should double in value because before I purchase I should consider, location, future market value, down payment available, renovations that need to be done in order to keep the house profitable for resale, how long I plan to keep it, what the history of the resales have been on the house to date, age of roof, age of wiring, structure the of home, if it is new who is the builder etc. etc. etc. Real estate is still one of the fastest ways to make money for the average every day person IF one is careful.

If not, *shrug*.

Not to mention that money halves in value every ten years.

Which is why real estate investment is a sound one.

 

[Walter]

More renters.
News Headlines

 

[Ariadne]

I firmly believe that it is always a better idea to buy than to give someone else money for 25 years so they can buy, but the economy plays a part. Strong economy, high prices, don't buy. Weak ecomony, low prices, buy. I think it should be a strong buyers market in the Spring.
Many large organizations and institutions were able to hang on and give the illussion that all was well at the beginning to the recession, but as time goes on, even large institutions have had to make decisions based on the economy. People should be looking at cutting their losses, especially in real estate, in the next year.