Is a home an asset or liability?

[Flexin]

Originally Posted by 101lifts2

It really depends on the situation and if you stay there long. Most people move within 5 years anyway, so they are always paying interest, closing costs, property taxes plus maintenance.

I bought my house for $99999. At the five year mark I think it was valued at $170000. Closing cost and so on were not going to be and issue even if I only sold it for $150000 or 160000. Renting would have never done that for me.

James

[goof2]

Originally Posted by t-rock

Ok so I guess the question I was trying to get at is a little more complex.


When you buy a home, you take on the house as an asset and the mortgage and related fees as liabilities. I think we all agree on this. Which one out-weighs the other in long term and/or short term?

As has already been stated it can only be measured by each individual transaction and a true judgment would require knowledge of the future.

For those who bought an "overpriced" house with a shitty mortgage the mortgage will probably outweigh the house. For those who are grabbing "under priced" houses now with fixed mortgages at 4-5% interest the house will probably outweigh the mortgage. That is dependent on real estate rebounding at some point, the first group selling at a loss and the second group selling at a profit.

To clarify my "knowledge of the future" comment, any losses or gains are theoretical until another transaction happens (the loss or gain is "realized" at that point). To illustrate, a couple people I knew in the late 90s were buying tech stocks on margin during the tech boom (against my advice). At first they were doing great and talking about how much money they were making, and how much money I was missing out on. When the "tech bubble" burst they both had margin calls and lost all the money they had invested in a period of 1-2 months. Before the bubble burst it was a good idea. Afterwords, not so much.

[pauldun170]

Originally Posted by t-rock

Ok so I guess the question I was trying to get at is a little more complex.


When you buy a home, you take on the house as an asset and the mortgage and related fees as liabilities. I think we all agree on this. Which one out-weighs the other in long term and/or short term?

The value of home ownership outweighs the cost of securing that home.

In the short term owning a home outweighs those cost and in the long term it is not even worth discussing.

We can toss in special circumstances and turn this into a pointless conversation but at the core, owning a home is better than the alternative.

This of course is about primary residences.

[shmike]

Originally Posted by pauldun170

The value of home ownership outweighs the cost of securing that home.

In the short term owning a home outweighs those cost and in the long term it is not even worth discussing.

We can toss in special circumstances and turn this into a pointless conversation but at the core, owning a home is better than the alternative.

This of course is about primary residences.

Stick to the definitions, Paul.

You just attempted to turn a quantitative question into a qualitative discussion.

You fail finance.

[CrazyKell]

Well aside from the definitions.....

personally I consider a house a liability (remember I'm not talking definitions here). A house would tie me down to one place and I don't want to be tied down. Weird view i know but that's what it is.

[Flexin]

Originally Posted by CrazyKell

Well aside from the definitions.....

personally I consider a house a liability (remember I'm not talking definitions here). A house would tie me down to one place and I don't want to be tied down. Weird view i know but that's what it is.

What did yous say? I drifted off once you started talking about being tied down.

James

[Amber Lamps]

Originally Posted by shmike

Stick to the definitions, Paul.

You just attempted to turn a quantitative question into a qualitative discussion.

You fail finance.

Exactly my point, saying that it makes you feel good or happy doesn't make it a good investment and this damn equity everyone is always on about is only worth something if you plan on taking out a loan. I mean great, you're $20,000 to the good on your house...Are you going to sell it and buy a nice used car? Are you going to sell and use that money for a down payment on another house? When do you stop having a house payment? When you're 60, 70, 80? What about that aforementioned property tax? Some of you might pay enough in taxes to pay my rent for the year!

[Flexin]

Originally Posted by TIGGER

Exactly my point, saying that it makes you feel good or happy doesn't make it a good investment and this damn equity everyone is always on about is only worth something if you plan on taking out a loan. I mean great, you're $20,000 to the good on your house...Are you going to sell it and buy a nice used car? Are you going to sell and use that money for a down payment on another house? When do you stop having a house payment? When you're 60, 70, 80? What about that aforementioned property tax? Some of you might pay enough in taxes to pay my rent for the year!

You can't be pro rent then talk about a home owner paying a house payment forever. Thats what a renter does and still has nothing to show for it.

And most of the people paying more in tax then you are in rent have a much bigger place. If you were to rent an apartment the same size as that home owner then you would be paying closer to what they are paying or more. You are forgetting something about property tax. It has to be paid on for every property. The place you rent is charged a property tax. They would not rent you a place for $7200 a year if they paid more then that for taxes. In most cases you will own a place for less then what a renter is paying. Its that whole business and profit thing.

James

[pauldun170]

Originally Posted by shmike

Stick to the definitions, Paul.

You just attempted to turn a quantitative question into a qualitative discussion.

You fail finance.

damn...
there goes my TWF gpa

[Homeslice]

When I talk about a house or property, i consider everything included with it. Property, rent from that property, mortgage, upkeep and maintenance, property taxes, etc.

Well, cashflow and appreciation are different things.......But sure, rental property is a good investment.........But I don't think it makes sense to own any until after you get a home for yourself first.

Originally Posted by derf

Its a liability until it is paid off, then it becomes an asset

It's always an asset. If you can sell it to someone, even if for just $1, it's an asset.