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Why your house is an investment, and an asset, too

Your house may be your home, but it’s also an important asset and a big investment

Some of you who read the headline above are wondering what revelation Monevator will bring you next.

Magic beans aren’t legal tender? Money doesn’t grow on trees?

Of course your house is an investment. Of course it’s an asset.

But from experience I know other people are up in arms:

“My house is not an investment! I will not consider it part of my net worth. My house is my home. It is not for sale. I have to live somewhere!”

The best that can be said for their viewpoint is that unlike much wrongheaded financial thinking, this particular form of fiscal foolishness doesn’t do much harm (aside from raising my blood pressure).

It’s not like thinking you borrow money from a bank (no, you borrow from your future self) or ignoring the impact of compound interest (clue: it’s enormous) or ignoring the time value of money.

In fact it’s likely a beneficial delusion.

Treating your home as a long-term commitment rather than a token to trade is a big reason why people usually do much better owning their own property than they do investing in shares.

But that doesn’t make them right.

Your house is an investment, an asset, and a big part of your financial net worth, regardless of what imaginary friends you had as a child or whether you avoid walking under ladders or whether you Feng Shui your home, or any other irrational thoughts you have about money.

The things they say

It’s so blatantly obvious to me that your own house is an investment, I’ve put off writing this post for years because I’m afraid I’ll sound like a patronising nursery school teacher asking if everyone is happy.

“Yes miss, I’m very happy today as I haven’t yet fully integrated my prefrontal cortex. Also, I think I’ve wet my trousers.”

Instead I’ve decided to just sound angry.

Twice in the past month alone, two financially astute people who I have a lot of time for declared to me that their house was not an investment.

And something snapped.

This madness has to stop!

Since by any normal measure it’s abundantly clear that your house is an investment – you go and buy a house, it increases in value, one day you likely sell it – normal weapons clearly don’t work on this form of muddy thinking.

Instead, we’re going to turn their own puny but persistent arsenal back on itself, by tackling each of their feeble defences in turn.

So let’s run through the things they tend to say, and why they’re wrong.

Incidentally, I’ll use the words investment and asset interchangeably, because they both apply.

You can also insert “part of my net worth” because they also claim a house that’s worth many multiples of their annual salary is not part of their net worth, too (I know! And these are sane people!) but it’s very clumsy to write that out.

“My house is not an investment because I don’t intend to sell it.”

Just because you don’t have plans to sell your house, that doesn’t mean it’s not an investment.

It’s an investment that you’re not selling right now. Simple.

Many of Warren Buffett’s friends and family never sold all their Berkshire Hathaway shares, and they became mega-rich because of that. They’d maybe borrow against shares to buy homes or similar, but they never sold out completely.

And you’ll notice that financial journalists don’t tend to write:

“What a shame Warren Buffett’s early friends and family didn’t make an investment in Berkshire Hathaway, because it looks suspiciously like they’re very wealthy on the back of those shares they didn’t sell. I guess it’s some sort of money illusion. Nice sports car, mind.”

Most people move houses several times. Strangely enough, when they come to buy a new house, they usually sell the current one.

When they do sell, they expect not to see change from a twenty. And the rest.

They want paying! From the sale of their house that isn’t an asset or part of their net worth. (Right…)

Young people renting houses up and down the country are not priced out of the market because estate agents will only sell to people who’ve painted their own walls and visited a Dunelm.

They are priced out of the property market because people bought houses, and those houses have gone up in value – like good investments do – and sure enough those homeowners want paying if somebody else would like to own their house.

If it walks like a duck…

Your house is an investment.

“My house is not an investment because I need it to live.”

No, your house is a very valuable investment because you need it to live.

It’s funny how people don’t consider their homes an investment, and yet they’ve no such confusion about pensions.

One day you’ll need to live on your pension, too. It’ll prove a good investment. Like buying your own home.

“My house is not an asset because I need to live somewhere.”

I know this will shock the smugger homeowners out there, but everybody needs to live somewhere. Those of us who haven’t bought our own homes don’t retreat to the woods at night to forage for snails and sleep upside down with the bats.

The fact that you need to live somewhere is one of the very good reasons to buy your own home. It can be the cheapest way to pay for living somewhere, in the long-term, not least because you end up owning a valuable asset. (Oh the irony).

If you chose to you could sell your house tomorrow, bank the cash, and start renting. You wouldn’t die like a clownfish flapping about on the High Street pavement, gasping for air.

You’d have traded one investment (a house) for another (cash in the bank).

“My house is not an investment because it doesn’t generate a return.”

Yes, people really do say this. Push them and they might say:

“Well I don’t even know how much prices have gone up, I don’t even look in the estate agent’s window. I don’t even check on Rightmove three times a week. Not usually. Not before lunchtime! My house is not an investment”.

Well, good for you, but even if that’s true, your ignorance about the value of your investment doesn’t mean it’s not an investment.

Warren Buffett says he wouldn’t care if the stock market didn’t open for a decade. He doesn’t care about day-to-day prices either. But every one of his shares is an investment.

It’s one of the biggest divisions in this country that those who’ve owned property for more than 20 years can utter this sort of nonsense with a straight face, having bought their homes for the equivalent of couple of iPhones and a pint of fancy cider.

But there you go. Their house has been an outstanding investment – likely multiplying their initial deposits five to 30-fold or more – but, I know, it’s a home!

That long-term tax-free capital gain is only one part of the return that you get from owning your own house, by the way.

You can also rent out rooms in a house. You happen to rent out rooms to yourself and your family. Economists call it imputed rent.

As we all agree, you have to live somewhere, and generally you have to pay rent for that somewhere, too. (Don’t tell your parents, generation boomerang…)

If you own your own home, it’s imputed rent all the way for you. Which means you’re a money-grabbing landlord (to yourself) as well as a moony-eyed homeowner.

The truth is you’re killing it in this investment game by owning your own home!

“I have to spend money doing up my house.”

This doesn’t mean it’s not an investment.

It means you have to spend money maintaining (or increasing) its value.

It means it’s not as lucrative as it might seem. It means it’s a less convenient asset than a fund held in an online broking account.

It’s still an investment.

“A house is illiquid.”

I agree. It’s an illiquid investment.

I have small cap shares that I bought in batches of a few hundred at a time to avoid moving the price. They’re still investments, too.

In the midst of the credit crisis, the Qataris and other sovereign wealth funds bought half-finished skyscrapers across London that nobody else wanted. They got them cheap, and it’ll be years before they sell. They’re investments.

I could go on for hours.

“My house is not an asset – I have a huge mortgage!”

Aha! At least here we have an appreciation of assets and liabilities. However it’s still wrong.

The fact that you have a £200,000 mortgage, say, on your £300,000 house does not mean you don’t have an investment in property worth £300,000.

You do. It’s just you also have a debt secured against that property to the tune of £200,000. The net asset value of your investment in property is £100,000.

This is true even if you’re in negative equity, incidentally. In this case you have a negative net asset value. Not good, though a lot better than if you had no house at all to net against the £200,000 of debt.

By the way, your bank won’t make the mistake of not counting your house as an asset if push comes to shove.

Despite the fact you live in it, that you have to live somewhere, that you have pictures of your kids on the walls and you painted those walls yourself – ah the memories! – your bank sees your repository of dreams as an entry on a spreadsheet that enables it to lend you the money to buy a house in the first place.

Just ask somebody who’s had their house repossessed.

Alternatively, go to the bank tomorrow and explain to them that you don’t want to buy a house at all. You’ve read on some different blog that a house is NOT an asset and NOT part of your net worth – I know, bizarre – so you really can’t see the point of owning one.

But you would like to borrow £200,000 to spend on a fancy tent and a lot of camping fees.

Oddly enough, your bank won’t lend money against your vagabond dreams.

“I don’t pay tax if I sell my house, so even the government knows it’s not an investment.”

Someone actually said this to me once. I didn’t know whether to laugh or commandeer a bus to run him over, and then reverse to make sure.

I know I’m inclined to take this one personally, given I juggle capital gains tax on a few puny thousands of pounds worth of shares while countless friends have made six-figure sums on their homes tax-free over the past two decades – and then I even take stick on this blog for trying to minimise my CGT bill – but anyway, for the love of all that’s Holy, just because you have an almighty tax break on your house doesn’t mean it’s not an investment.

It’s just another way in which it’s potentially a great investment.

“There’s no point me considering my house an investment, because it would make up most of my net worth!”

This doesn’t mean it’s not an investment.

If you actually totted up your own personal balance sheet properly, you might better appreciate that you’re very exposed to one asset class – property – and very light in most of the others – cash, bonds, and equities.

“House prices don’t go up so much once you take into account costs and inflation.”

An interesting point. But while I’d take a lot of persuading that houses are a bad investment, presuming you don’t buy in the middle of a bubble – I’m not actually arguing in this article that houses are a good investment.

I’m arguing that houses are an investment, good or bad. Which they are.

“It’s only worth something when you sell it. Otherwise it’s all paper.”

An ex-girlfriend used to say this all the time. She was smart but had some funny views about money.

By this measure only people who keep all their money in cash are rich, and the rest of the world’s wealthy are phonies.

This means Forbes will have to rewrite its rich list to focus on drug dealers, prostitutes, tin can millionaires, and Scrooge McDuck.

While it’d make for an interesting read, it’d also be wrong.

As rich people everywhere know, you don’t have to sell something for it to be worth something.

Another brick in the wall

It’s very simple. You invest in a property, you probably bought it with a mortgage that you pay off over the years. Eventually you own the house and you can live in it or roll the money into a new one.

While owning it you live seemingly rent-free (or more accurately enjoying that imputed rent, and please note I didn’t say ‘cost-free’) until the day you die or achieve immortality by cryogenically freezing your brain and encamping yourself in your living room amongst all those lovely things you own and those nails you hammered into the walls (“my house is not an investment, I just don’t want to ask a landlord for permission to bang in a nail!”) for all eternity.

And you can sell or downsize or trade-up your investment along the way, too.

If a 70-year old woman sells her rectory to buy a smaller and more manageable two-bed flat, she is not obligated to pretend she hasn’t got a six-figure sum in the bank that doesn’t really exist because her house was a home not an investment.

She’s allowed to spend the money she gets from selling her investment, including the capital gain she made it.

Somebody else might end up renting all their lives (foolishly, in my opinion, but it’s what I’ve done so far so there you go), investing in shares or other assets, and eventually have a portfolio that pays their rent when they retire.

Their share portfolio is an investment, too, even though it pays for them to live somewhere, which we agree is essential.

The fact that your house’s gains roll-up capital gains tax free, or that it’s illiquid, or that you bought it using leverage (a mortgage) does not mean it’s not an investment or an asset – it just tells you more about what kind of an asset it is.

The last time I tried to convince a good blogging buddy of mine that his house was an asset, he retorted that his house had:

“… absorbed capital that I cannot liquidate without exposing us to hazardous renting and the UK housing market that appreciates above the rate of inflation – that’s a dangerous thing for a retiree to do financially.”

Talk about making my case for me!

Yes, a house is not some useless consumable item – it’s a damn useful asset/investment to have when you’re retired for exactly the reasons he states.

Just ask the old boy who rents next door.

Things that aren’t assets:

  • dishcloths
  • mistresses and toy-boys
  • budgerigars
  • leftover pizza

Something that is an asset:

  • a house

Our property-disowning, home owning democracy

The worst thing about this whole nonsense is it infects social policy, too.

We live in a crowded country where we’re invited to feel sorry for wealthy pensioners living alone in four-bedroom houses whose Council Tax has risen because their home, well, it’s not like a big house is an asset they could sell, is it?1

We also have situations where old person A doesn’t have to sell his house to pay for care, but old person B who saved the money in cash instead is judged as having the means to pay for it. (I paraphrase, but that’s the gist – and it applies to all sorts of means-tested benefits).

The incredible thing is that even after getting through these 2,541 words (count ’em!) someone, somewhere, is thinking:

“Yeah, but that’s rubbish, because my house is not an investment”.

Look, I get it. You like the security of owning your own home. You don’t intend to sell. You dealt with the dry rot. You love the wisteria. You haven’t considered what you’d get for the house if you put it on the market since the day you bought it and carried an IKEA bag over the threshold.

Fine, that all makes sense.

Just don’t tell me that your house is not an investment or an asset. Because that’s exactly what it is.

  1. Seriously, why do we feel sorry for a homeowner who has to sell up, but not for a renter who is already renting? It’s muddled. []

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{ 69 comments… add one }
  • 51 Dave August 17, 2013, 4:08 am

    Investopedia thinks that the *hope* of income or appreciation is enough to make something an investment? No wonder so many people get poor returns from their investments! There really should be a reasonable expectation of income before something qualifies as an investment, shouldn’t there?

    On a more serious note, the major point of difference appears to be whether the intentions of the buyer are relevant to whether or not something is an investment. I think they should be because taking the buyer’s intentions into account leads to greater clarity of thinking and ultimately to better decision making. I would be interested in hearing someone from the other side explain the benefits of excluding the buyers intentions from the definition of an investment.

  • 52 Geo August 17, 2013, 12:53 pm

    I was on the side of it not being an investment, although technically I can accept it as one now although more an asset. I do think though even if it is, most people shouldn’t think of it an investment (well not much). I see my house as an investment so I won’t have to pay rent/mortgage costs one day and I guess as an asset for my kids – but that’s it.

    I think one key thing is we really shouldn’t be happy that houses go up in value but unfortunately we are obsessed about this in the uk. Rising prices aren’t helping people who are moving on or up the property ladder.

    I would be interested in some calcuations on mortgage Payments over 25 years, interest, inflation, costs, repairs, carpets, paint and see how much of a good investment a house really could be. I suspect it’s maybe not that great.

    Finally I think there is a big difference between London and a lot of the south east and the north or other areas. The difference in price rises can be quite different. I think as a young person in London houses are an investment, the gains bigger than other areas and the likely hood you will move to a cheaper area.

    Anyway great article/food for thought and great comments too.

  • 53 smiling vulture August 17, 2013, 1:05 pm

    Simple Living in Suffolk
    blog@copyright

    Taking my ex-colleagues as a benchmark, two things clearly stick out as different about my lifestyle choices. One is that I am child-free, and the other is that housing is a much lower part of my net-worth than for most of them 1. The reason for the lower percentage of net worth is I had a very bad experience of the housing market early on in my career, and never saw it as a financial investment that could only go up as everybody else seems to do. I have only as much house as I need, which is a three-bed semi for the two of us. The reason most of my colleagues had the dominant stake of their net worth in housing was because they have a lot more house than I do in general. It isn’t because not having children has made me particularly rich compared to them, though there’s an argument to be made that if you have kids you probably do need more house

    Having more house than you need is a hit on your net worth if you live in it, because you take on more massive debt on something that provides you with a consumer good – living space, as well as accumulating an asset. Over the course of a 25-year mortgage you pay about twice nominal for the house, maybe 1.5 times real terms 2. You have to heat, furnish, maintain and service that space, and the more there is of it the higher your running costs will be. You do, of course, build up equity is a larger asset – when they have paid off their mortgages my ex-colleagues will have houses that are worth a lot more than mine. After which, by the looks of some who have got there, they will rattle around in them and keep spare rooms for the kids to visit, though those kids will not visit as often as they’d like. So they keep a lot of their net worth tied up in bricks and mortar, which doesn’t pay any financial return. Note this is totally different in the case of the buy to let owner – they may also have a lot of their net worth tied up in housing, but the return arrives in the form of the rent cheque every month.

    Because I have the excess net-worth in financial investments I have less room to swing my cat in. Compensating me for this is the income from shares. The general return from the relative asset classes seems to be similar over the long run, accepting that the capital value of shares is hellaciously more volatile than that of houses. This is the evil twin brother of the higher liquidity, I guess.

    I’m not telling people how to live their lives, each to their own. However, I do observe that there’s often a lot of emotional capital invested in a family home. In my own case, it was probably not a rational decision to pay down the mortgage in a time of low interest rates when I was planning to retire early. I mainly wanted rid of other people being able to tell me what to do by controlling money – I’d had enough of that at work and wanted shot of the threat at home from the mortgage company. It would have been much more sensible to keep the mortgage and use the cash to invest and bridge the gap rather than save the cash upfront and pay off them mortgage. But in the end, if you don’t want other people to be able to control you through money, then don’t borrow money from them and don’t depend upon them for an income. Paying the mortgage off was a dumb thing to do, financially, but sometimes claiming financial freedom isn’t financially clever. But it sure does feel good.

    It’s usually a very bad thing to have a lot of emotional capital invested in something where you have a lot of financial capital too. You tend to end up with sub-optimal results, it’s hard enough getting a handle on personal finance as it is without adding a great layer of confounding emotional values.

  • 54 OldPro August 17, 2013, 2:30 pm

    Ripe dark comedy from a few characters replying to this one…

    United Kingdom is divided into the property owning “haves” and “have nots” … gulf in wealth and twixt generations … and all my peers own houses that start at minimum £1/2 million… some rattling around in pads worth well North of £1 million… almost none could afford half as much on their income now…

    … and yet because young Master “Ermine” bought a lemon in 1989 we hear that property is not really an investment? It is a timebomb?

    Hilarious!

    I thought I was reading a moaner-thon on the Guardian by mischance… no it is the Monevator… Must be Sports Day?

    I invite you to tell Lord Grosvenor that property is not an investment… he’ll laugh a charm and then he will kindly take your deeds off your hands…

    As the rich say and as I believe have quoted on the Monevator before… if it floats, flies, or f–ornicates… rent it.

    Your house you buy. Big as you can!

  • 55 Phil August 18, 2013, 7:50 pm

    It’s quite easy to spot the comments written by the people that actually bothered to read the article… as opposed to the comments written by people just who read the headline and went, ‘Huh! Let me tell you something… Property isn’t a safe investment, yadda yadda…’

    It’s very telling when people assume the word ‘investment’ means GOOD investment. One worries for their financial stability…

    Interestingly, there’s a lot of ignorance on the other side of the coin, too… Far too many people think that ‘debt’ is automatically a bad thing. As many people here will realise debt is useful for all sorts of things, tax reasons, inflation hedging and financing a company’s expansion through bond issuance to name but three…

  • 56 Evan August 19, 2013, 8:16 pm

    It may be an investment but can we agree that it is a terrible one? Lets say I offered you an investment that:

    Is highly illiquid
    If you do sell there are tremendous surrender charge like fees
    At any time I can ask you to put more money into it that may or may not raise your principal investment, but if you don’t put that money your principal investment will go down QUICKLY
    On going interest charges for 30 or so years
    You will be taxed on the value of the investment every year
    Will literally never throw off income
    Every month/year you will have to give me more money and if you don’t you lost almost everything you put in
    Taking everything into account above it is very likely you’ll have a negative internal rate of return…but don’t worry no one takes everything into account.

    …you’d run!

  • 57 oldthinker August 19, 2013, 11:01 pm

    @Evan

    > You will be taxed on the value of the investment every year

    Do you mean council tax? In what way is it a tax on investment in property? Would this tax not be the same if I rented the house and invested my money in shares instead?

    > Will literally never throw off income

    Strangely, this often-stated objection would not apply if I decided to let my house out and rent a similar one next door. Note that such an arrangement would be less efficient financially than living in my own house, because I would have to pay tax on the rental income.

  • 58 Evan August 20, 2013, 5:18 am

    @OldThinker,

    I am not sure what Council tax is but in almost every municipality in the US we have what is often referred to as property taxes and usually they are based on the value of the home.

  • 59 The Investor August 20, 2013, 8:41 am

    @Evan @OldThinker — Yes, the US versus UK situation may be a little different. Council Tax is an annual charge that’s levied annually that’s theoretically based on the value of a home. It has several rate bands, and all the values and bands are compressed compared to when it was introduced. (The bands have never been revised despite multi-bagging rises in average house prices). It’s nothing like as devastating as say a tithe of 1% of a property’s value would be in the South East of the UK.

    We do have stamp duty tax when properties are bought, which can be more onerous (up to 5%) and further speaks to the argument that property is costly to buy and sell, and reduces liquidity.

    On the other hand we don’t have any mortgage interest tax relief, which you still have in the US to some extent.

    Anyway, I agree with all your points to some extent (the income point is wrong in my view, as I discuss in the section on ‘imputed rent’ above) but I do NOT agree that they add up to make property a bad investment. They add up to make it an investment with certain characteristics, some good and some bad. As I’ve written before, some of its less desirable attributes, such as illiquidity, actually make it more successful for many people, because they are forced to stick to it through thick and thin, compared to shares where they buy and sell at the wrong times.

    Similarly, several of your points are really about the downsides of having a mortgage. But the upside is people get to buy an asset that has historically over most periods in the UK greatly increased in value, using other people’s money, which has meant that the vast majority of UK home owners have profited handsomely from the deal over 25 years.

    The US is again a bit different in that you haven’t had the stellar (and divisive) price appreciation over the long term that we’ve had in the UK, and also because you recently had a big property crash.

    But the scars from the latter won’t last. I was urging US friends to buy in early 2012 (around when Buffett was explaining a single family home was the best deal in town) and bought US banks on the back of my confidence that US property will return to strength again.

    I have to stress again I’m not some Cassandra when it comes to owning a home. I am so aware of the downsides and bearish arguments that I’m nearly 20 years into gainful employment and I’m still renting. I didn’t want to overpay for what I saw as over-priced London property, and I was concerned about interest rate risk etc. I didn’t want to be locked in during a bubble. I get it all.

    Fact is though, in the UK over most periods it’s been an excellent investment — about the only good one some people ever make.

  • 60 gadgetmind August 20, 2013, 8:55 am

    Gee, all these arguments are mighty fancy, and I’m sure that someone is right and someone else is wrong, I just don’t know who.

    And as with many arguments of a financial nature, with their predictions, simulations, back-testing, and the like, the question I always ask myself is “In the light of this, how will I adjust my portfolio and/or general approach to investing?”

    As the answer is usually “not one jot no matter who’s right” I usually do nothing, and the same will apply no matter who wins this one. (Or more likely who loses the will to live the soonest!)

    As per my opening message, even if my house is an investment, I can’t include it in my plans in anything like the same way as my other investments. It’s therefore simultaneously an investment and not an investment, and I doubt this wave function will collapse even when I retire.

  • 61 Geo August 20, 2013, 9:11 am

    I think this is the best:

    “It’s simultaneously an investment and not an investment”

    Well done gadget!

  • 62 Dave August 20, 2013, 10:34 am

    “the question I always ask myself is “In the light of this, how will I adjust my portfolio and/or general approach to investing?” As the answer is usually “not one jot no matter who’s right” I usually do nothing, and the same will apply no matter who wins this one.”

    Gadgetmind, that is the most sensible comment so far. If you had said that right at the beginning I wouldn’t have wasted far too much of my weekend thinking about different definitions of investing and which was best. It was interesting, but in the end it doesn’t change anything.

  • 63 oldthinker August 20, 2013, 12:48 pm

    @Evan,

    I did not realise that you were referring to the US situation – you have a valid point there. Over here, Council Tax is paid by the occupier of the house/flat, not by its owner (the logic being that this tax pays for various services provided by the local authority); there is no annual tax associated with owning property in the UK.

  • 64 Tedious Pseudonym August 22, 2013, 7:45 am

    No one seems to have pointed out that really a house is a hedge rather than an investment… It is a pretty good inflation hedge, and a very good house price hedge. If you can, you end up with a large-ish family house, which you eventually want to downsize from and hopefully net a pot of gold in the meantime.

    However, even though I’ve just bought an extremely expensive house in the south east of england, I’d be happy for prices to come off, as it means I could move again at less expense. It is a cost, even if it’s one that comes with benefits.

  • 65 gadgetmind August 22, 2013, 8:07 am

    But is a hedge an investment bearing in mind the on-going maintenance costs of keeping it trimmed?

  • 66 Paul S April 22, 2014, 12:21 am

    Hi all,

    Owning a house is a trade off, you need somewhere to live, one way of achieving this is by purchasing a property and as a fringe benefit the house is likely (as likely as a lazy portfolio) to increase in value over the mid to long term, to beat inflation and pay back a good return making it somewhere you lived in that happened to have turned out to also be an investment that increased in value.

    Just like a 20 yr. investment in the stock market or EFT or index tracker 😉 I look at some historic evidence as a ‘guide’ to the future (no one has a crystal ball!) and take a measured risk….but it is a good one as I don’t have to stump up all the £500k, just a few tens of thousands a year….

    I example as follows:

    Person A – decides to buy a property, they are buying a ‘warrant’ and placing a bet… the bet is:

    I have to pay to live somewhere for the next 50 years (your number) and that will cost me £1000 a month (your figure) I will spend £600k, in that time rents may go higher (likely) or may go lower (maybe), how about I take a reasonable risk…

    Can I pay £1000 a month for the next 20 yrs to live in a nice place (where I choose the wall colour LOL) and get to live for the remaining 30 years ‘rent free’ – YES – I will buy a house and pay a mortgage for 20 years until I own the property.

    If during the first 20 years or after my needs change, can I change the house? cash some of it in? cash all of it in? – yes…

    Caveats:
    Mortgage costs can go up or down over time (just like rent, but rent is more likely to head upwards only)
    If I can’t afford my mortgage someone might take my house off me and I will lose the money I have already spent on it (did you ever get any of your rent money back?)
    The evidence on this risk tells me that if I pay for about 5 or ten years, I will at least get all the money back from the original cost of the house or maybe a bit more (but lets face it the bank lent me the money so if its evens after 5 yrs, just like renting right?)

    If I look at retirement, and I am still renting, is that going to eat a significant chunk of my pension income …. well maybe…. I can rent cheaper/smaller/different area right?….hmmmm….. just the same as with my house (which I own, is worth more than I paid for it and has been paid off) and I get a big chunk of change…..

    well maybe…

    Paul S

  • 67 DK September 23, 2014, 2:00 pm

    Based on a purely technical definition of investment i.e. the expectation of tangible return, a house is not an investment, it’s a liability – money leaves your account each month to pay for the privilege of owning it. The house puts nothing in your pocket, end of story (and no, you shouldn’t buy your own home just for the expectation of capital appreciation).

    The rest of the argument is semantics and perception and not worth getting so wound up about.

  • 68 Lucas March 20, 2016, 11:00 am

    Your ex-girlfriend is not completely wrong. Of course, some part of the paper value will be realized on the sale, and assuming you did not overpay as so many people have done, perhaps there will be a generous gain. On the other hand, the paper value is not real until it is realized, as many people learned when they made the mistake of thinking that the bubble value of 2006 was the real value. Some sellers still think the 2006 value was real and believe they sold their house for a “steep discount in” 2011.

  • 69 Dave August 25, 2016, 3:32 pm

    I see what you mean in a sense, but I consider a house a liability and and investment. Obviously anything you personally use is an investment in yourself but business wise its a liability. Owning a home or paying or even rent, will suck money like a 2025 hoover vacuum. This is why I advise the young to either get a cheap first home or a duplex so that it can have real asset properties.

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