I heard owning a house is a great investment. Homeowners will build wealth quickly than no homeowners. Is that true? From your experiences, how much you made from selling your house and how long should you stay in same house to build wealth? I have lived in a house for 4 years now. I bought it at $260,000 in 2020. My house value goes up to $340,000 now. Will it keep growing? When is the best time to sell a home?
Homes act as a store of value now more than the utility/commodity they actually are. This is because the money supply is growing faster than the housing supply. So, yeah, a homeowner will almost always accrue wealth faster than a non-homeowner for this reason. The exception to this would be a non-homeowner parking their wealth in BTC or something that has/will appreciate a lot faster than a home. When should you sell? Assuming you are going to buy into another house immediately then it doesn't matter. You're riding both ends of the same teeter-totter.
In general yes homeownership is a good way to build wealth. In general home values grow just based on inflation but the added benefit is that you get to live in your asset. Unless you can pay cash for your house you’re going to be paying money each month to mortgage just like you would be paying rent. The difference is is that each month you pay down your principle you’re building up equity while when you rent you’re not building up anything. Home ownership has other cultural and societal benefits. In general people who own their home are more likely to maintain their property and want to protect it than those who just rent. This encourages civic responsibility.
*rolls up sleeves* ...you came to the right place, sonny! Owning family real estate is the best investment 97% of people can make. Never buy a trailer or a timeshare. Outside of these, real estate always goes up in value over time (barring natural disasters or toxic waste). You said it yourself, your home has gone up in value 40% in four years. Another way to look at it is you made $80k just for living in a house for four years; that's equity that, combined to debt-to-income ratio and credit score, you can leverage to build more wealth. That other 3% of people are very good at the market, or have a great broker. Or they have lucked out in high risk investments like crypto. Or they have inside tracks on investment opportunities, meaning they are able to raise X amount of dollars to put in at a short notice. Or they're just preternaturally good at running a business. For 90% of these people, that requires work over and above their 40 hours a week of work. So they are putting in sweat equity/time into growing their wealth. So back to you, you didn't do jack to earn $20k a year equity. When shouldn't you sell? Almost never. Never to 'upgrade' your lifestyle and keep up with your friends if you comfortably fit your home. Never to buy toys. If you feel like you're slipping vs your friends, ask them how much debt they have, if they could live for six months without a job, if their credit is ****ed....if they are really happy with that move. Consumerism is a huge trap (that us investors gladly take advantage of). Don't sell to buy a boat, don't sell to buy high-end cars that no one really needs. When should you sell? When it makes economic or life sense to do so. Do you need to move for work or due to the health/safety of a loved one? Yes, but be frugal and try to recapture that equity in the next home (there are great deals out there, don't rush). Is there an amazing deal on another home where you make a profit in equity? Yes. Is there another solid financial reason to sell and grab that equity for a better investment? Yes, good time to sell. Taxes: look up IRC Section 1031, which provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. The trick is that buy rolling this money over and over into similar properties....until you die. And poof, that tax liability, which was on you....is gone. Your heirs get that profit back relatively tax free. This is why so many truly wealthy have vast swaths of real estate in their portfolios. It's an amazing tax shelter. My advice for you is to get educated. You're making a GREAT start by asking! Take care of your credit and keep your 'bad' debut (look it up, but I mean any revolving credit) and you can grow that $80k into millions. Good luck! Edit- thinking about it, real estate investment, like almost every other kind, really just boils down to math. If the math works, do it. If not, don't. Sure, there are very important things like insider knowledge, developing a sense of how the business works, reading the table (the sellers/other investors), knowing the area, etc, but really, if the math is solid, it's almost always a good investment.
My house value now is $340,000. I purchased home for $260,000. My remaining principal balance is around $188,000. I am in 4th year of 30 years mortgage.
$VTI was 163.93 on Jan 03 2020 and is now 248.46. This crushes his 40% home investment earning and isn't crypto nor does it require insider trading. It didn't require maintenance and can be complete tax shielded (forever) in a retirement account. The good thing about home ownership is you can live in the house, so buying one if you plan to stay there for 7-10 years is great. It's easier to budget because the rent can't double in a year.
Home value can also go up or down based on homeowner improvements or neglect, and similarly the neighborhood can rise or fall based on external factors such as a major employer moving into the area or a gang moves in down the block, as an extreme example. Often, in my experience, people overestimate how much the needle can swing by making improvements... as there is sort of a base level set by sq footage and location. I'm sure there are technical terms for these things that I am unaware of. One improvement that surprises me a little is solar not adding much in the way of value to a home. The way I'd try to sell it to a buyer, is you're saving $200 a month (or whatever for the size of the solar setup) which you can then use to pay down your mortgage faster, or build an emergency fund or whathaveyou. This does not seem to translate to the real word of real estate but then again, most solar setups are on rooftops that make compromises to roof integrity and insurance and so on which is more understandable... Also, if you get into the weird scammy world of financed and leased solar that can be a nightmare and I wouldn't touch that sort of thing with a 10 ft pole.
Think that technology will exponentially refocus buyers toward custom built homes that can be designed, shipped, and built in hours. Build it. Then plug it in. The house can be packed up and shipped to your new locations and expanded or altered to meet your needs. And because of that, pre-built and lived in homes will become like old baggage and expendable. People will need land to build on though. So land. That's your meal ticket.
You're cherry-picking here. Today it's 248. What's the 52 week low? It's 190, right? That's 18% from your Jan 3 date. Take a look at early 2020, which was abysmal and a low point. I'm not saying don't diversify; I have $VTI in my portfolio. I'll stick to my guns with real estate being the best investment vehicle for most people. It's doesn't have wild swings like the above chart. It's solid. Improvements are where you need to be knowledgeable on what gives you the most bang for your buck. As you said, solar is not much for value...really, because the consumer isn't educated enough to move the demand for solar-installed properties and their wife doesn't care or thinks it's ugly. I may value it but if the comps in the area say your house is worth X, I'm not going to go over by much to buy your property because the market says I don't have to. People generally don't care if the house has outdated piping or electrical, either, unless it stops their financing. Know what increases the value of a dwelling, and that's mostly ascetics and amenities. Crown molding is a huge bump, and you can put it in super cheap. Updated kitchens and bathrooms, floors, etc. That's what sells. You can get comps from a real estate agent or there are databases out there you can subscribe to. This stuff gives you highs and lows of sales history complete with previous listings where you can look at pictures and issues and extrapolate what was good or not. Most neighborhoods are seeing an upward trend the past several years due to the housing shortage, so we're seeing gentrification in most major metropolitan areas. Prices go up, people sell, rent goes up, the attractiveness for Section 8 housing for landlords goes down, unsavory fringe types get squeezed out. So that's the lesson there. Don't invest in podunk Kentucky that only has one employer. Stick to big metropolitan areas. As for gangs...most people look at houses during the day, but the freaks come out at night (which is always why I drive around areas I'm looking at to invest at night).
Why do you guys keep pushing this stupid narrative? I would be paying 2x in rent than I do with my current mortgage. Not everyone can live in their parents basement.
Selling and pocketing the equity or refinancing for cash is not 'getting wealthy'. Most people are not savvy enough to reinvest properly. They often yolo or end up spending the money on goods and services. If a person buys goods and services with their equity, all they are doing is amortizing that debt for a long period of time at a low interest rate.
Homeowner and landlord. Both are work. VTI isn't. Inflation eats the mortgage interest. Insurance costs are skyrocketing in some states. Just riffing
It makes sense in a narrow set of circumstances. If you plan on raising a family the idea is pretty much DOA. If you're a digital nomad it can work.
