Houses are a Trap, anyone agree ??

Question

People who said renting was foolish, are just that FOOLS !
I ran the numbers, and if someone were to rent for let's say $1,000 a month, and invest $500/ month into some mutual funds every month, in 20 yrs they'd be better off by far. The housing boom is over !
Renting is the way to go, you're never trapped like a house, no HIGH TAXES, INSURANCE, LAWN MOWING, LEAKY ROOFS, ELECTRIC BILLS UP THE WAZOO, ON AND ON AND ON.
People actually are dumb enough to think they make a profit on a house, but they fail to remember all the taxes, and misc. bills each month, most barely break even. I will be selling my place this year and renting, investing in the market each month with no headaches, and no frivolous bills like $400/ month just for heat.

WAKE UP FOLKS, HOUSES ARE A TRAP, A LIABILITY, NOT AN INVESTMENT. DON'T BELIEVE ME, SHOW ME ONE GUY RENTING IN FORECLOSURE!! CASE CLOSED.

p.s. the only people who made money on houses were 15 yrs ago, and that was just dumb luck.

Answer 1

You are absolutely right that your long-term, primary residence is most likely a "drain" as opposed to an "investment" or "asset". Good investments generate cash flow and primary residences usually drain cash flow. From an investing standpoint, your own home is usually not a good investment.

If you are going to take such a giant step towards your financial future, I would urge you to get out of the mutual fund mentality and learn how to invest in quality stocks. Mutual funds are good for average, stable returns for average investors needing stability. If you are going to maximize your own personal cash flow, learn how to use that concept to really maximize your own wealth as well.

Answer 2

Trying to create a "one-size fits all" answer here doesn't make sense. I prefer apartments myself for most of the reasons you noted above. However, you failed to note the tax advantages given to homeowners, the fact that their mortgage is fixed unless they were foolish enough to get an adjustable mortgage (no rent increase each year), there is no guarantee the stock market will continue to increase (although I think it will for several years), etc.

That said, there are lots of people that got into the housing market as an investment in the last few years and aren't happy right now. Much like when the stock market goes down, they can either sell and take the loss or hold it until the market rebounds which can take years.

What I'm saying is that real estate is fine for some investors, while your approach will work for others. However, it is very hard to diversify when you can barely afford one house......

Answer 3

I disagree, firmly. While there are the costs that you rant about, you forget the tax advantages. That house, with it's interest rate can come off of your gross income, dropping you into a lower tax bracket. Once you own the house, that is, it's paid off, you could do a reverse mortgage if you are well on in years, to have an income from the investment. For the cost of taxes, you have a low cost place to live, after the home is paid off. As an owner you do get better loan rates. You are viewed as a more stable person if you own as opposed to rent. Once you own the house, there is nothing that says you have to maintain insurance, although I would. If you rent there are still lawns to mow, or a fee to pay to have it done. If you rent you can't take a cent of that off of your taxes, you still have utility bills to pay, you still pay taxes because they are a part of your rent. A house appreciates in value, a rented home does also but you do not benefit from it. AND, if you are bright enough to follow a bit of advice, you can LEGALLY cut your payment in half. It is very simple. After the monthly grace period ends for the mortgage payment that is due, send the mortgage company, or bank, a half payment that you would normally send. If your payment is $1000 a month, send in $500 in that month. From there on, all you will be sending in is $500 per month. How else do you think the advertisement on TV works where you pay only half your monthly mortgage payment. Every banker in the world knows this, as do real estate agents. The banks just do not want you to know.
If you want to lose all the benefits of owning a house, be my guest and sell yours. Go ahead and rent, but your dreams of having extra to invest, unless you go to a bug and rat infested hovel will not transpire. One last point, if the owner of the house you are renting is foreclosed upon, you are on the street with no recourse. I think you have your facts mixed up. You do not have all of the facts that you need to make a point that is really worth considering.

Answer 4

Let's see...I bought a house in 1998 for $321,000 and sold it in 2005 for $690,000. Initially I put $16,000 down, paid about $2200/year in taxes, $700/year in insurance, and maybe averaged $14,000 a year in mortgage payments. Improvements that I put into it were new floors, windows, paint, and a roof for about $15,000. I rented out some of the rooms while I was living there for income of about $10,000/year. It cost me about $45,000 in commissions and fees when I sold it.

So my total income on it was $690,000 + (7 * $10,000 rent) = $760k.

My total costs were $321,000 for (mortgage + down payment) + (7 * $23,200 PITI) + $10,000 + $45,000 = $538,400

That means a net profit of $221,600 in 7 years which was completely tax free since it was a home I lived in.

Also, the mortgage interest payments each year were deducted from my taxes giving me an increase in take-home pay of about $5000/year.

Find me another investment that will perform like that.

Answer 5

Whatever. You have no equity. You pay rent and have nothing to show for it. I made $120, 000. when I sold my house. I had privacy, the right to fix it up as I pleased and no landlord to tell me I couldn't have pets or paint it whatever color I wanted. I had no noisy people over me. It was the best investment I ever made.

Answer 6

I can not disagree if you save. I can not of the life of me figure out why some you would buy a condo and can move out if there are crappy neighbors.

To many people out there are house poor and have no cash and can not sleep well know that there are going to be upside down soon.

Answer 7

never looked at it that way ,very interesting
i have always rented by the way