BiggerPockets

I'm curious to see folk's philosophy on this. I consider my personal residence to be a doodad I live in. Yes, I bought it at about 20-30% fmv but regardless, it is a piece of real estate that garners no cashflow for me, thus no return, which is why I have always lived in my least performing asset while renting out the rest.... Then again, I have that freedom as an "unattached" guy and that ain't changing any time soon.

So, I'll put it to you. Your house. Investment or Doodad and why? What's your reasoning behind it? Any data to support your view?

I agree with Matthew - ALLIGATOR!

Mike

Normally my place is a dooddad, even when it doubled in price in three years (that's gone now)

But for now it's acting a little bit as an asset as well - my girlfriend pays rent. That and I have a heloc still open during these crazy times, one that would allow me to go upside down, but do an all cash deal. Perhaps that just means my credit union is an asset.

Overall, I like the - your primary is a doodad - concept

I can tell by the answers that half of you have read Rich Dad Poor Dad. and for the other half including Tim i rcomend giving a read it touches nicely on exactly this.

Originally posted by Kevin Mc Garry

I can tell by the answers that half of you have read Rich Dad Poor Dad. and for the other half including Tim i rcomend giving a read it touches nicely on exactly this.

FYI - I first read it 11 years ago and have read every one of his books and met and talked to Robert and Kim. :cool: Glad to see we're on the same page, just wanting to get everyone else's view. :wink:

I first appoligize Tim I didn't mean to come across pompass.

And yes I think your private home is both an investment and a liability. We have all lived up until recently in a housing market that did nothing but generate equity and continue to increase in value as time naturally goes by....But as recent times have shown our golden egg does have flaws and an investment market that could never go down has slowly gone to hell in a hand basket. So in conclusion i think real estate has fallen into the same class as any other "investment" and will only become even considered an asset or wise investment to those who are able to hold onto the said investments till things turn

My opinion only

I realize that it doesn't put income into your pocket, but its still can make you wealthy. Particularly if you have the savvy to purchase well in a good area.

I can see folk's reasoning as to looking at their home as an equity asset. However, just to play devil's advocate a little further on this - does an asset increase or diminish your capacity to acquire more assets. Now look at your home, it is increasing or diminishing your capacity to acquire more assets? With most people, I'd venture to guess it is diminishing their capacity.

Though I consider my residence a liability, it is one unit within a 3 unit I own that is zoned for residential and commercial use. I'm going to seperate residence from residence premises. The residence premises (an insurance term used to describe the entire property as a whole, not just the area you live in) of my 3 flat is an asset, though my individual residence within it is a liability. Tom's house on his property may be a liability, but the residence premises is a commodity producer.

Think about your residence premises. Is there something about it that can be turned into an income producing asset even though your residence itself is a liability? If the answer is no, take a look around you in your market. The market is filled with great buying opportunities. Is there a way to maintain your standard of living within a residence while acquiring a residence premises that is an asset?

If you're a condo or apartment dweller, why aren't you living in a multi-unit? If you're outside the city in a McMansion in a subdivision on 1 acre lots, why aren't you in a rural McMansion outside the city on a 5-50 acre piece of land zoned agricultural, costing less in taxes and at the very least, leasing out horse boarding or commodity growing rights to another farmer? There are ways to do this without massive lifestyle shifts.

Mine is a doodad. If you really want to see how the numbers work. Add up all the expenses associated with your house and run the numbers like it's a rental. That'll give you how much your operating expenses are per month. Put it in the investment calculators and see how your expenses will go up over time as the property is paid off then you can see your true ROI on the property after tax and before tax. Calculate out your speculated appreciation of your house and see where you really end up at.

If by some freak of nature your house does end up with a positive ROI then my guess is that it is less than 2%.

I ran the numbers so I could find my true cost of owning my house and I was astounded at how much it gobbles up. Way more than my mortgage payment is. I suspect this is why many people that got into bad loans are in the position they are in. They bought a home expecting the only cost of homeownership to be PITI and never took account for lawn maintenance, utilities, cost of upkeep, capital improvements, etc.... I just got back from the store with $50 of salt for my water softener, something i have to do 3-4 times a year. I know I never even thought to take that into consideration as an expense when I built my house.

-Michael

Originally posted by Tim Wieneke

Though I consider my residence a liability, it is one unit within a 3 unit I own that is zoned for residential and commercial use. I'm going to seperate residence from residence premises. The residence premises (an insurance term used to describe the entire property as a whole, not just the area you live in) of my 3 flat is an asset, though my individual residence within it is a liability. Tom's house on his property may be a liability, but the residence premises is a commodity producer.

Think about your residence premises. Is there something about it that can be turned into an income producing asset even though your residence itself is a liability? If the answer is no, take a look around you in your market. The market is filled with great buying opportunities. Is there a way to maintain your standard of living within a residence while acquiring a residence premises that is an asset?

If you're a condo or apartment dweller, why aren't you living in a multi-unit? If you're outside the city in a McMansion in a subdivision on 1 acre lots, why aren't you in a rural McMansion outside the city on a 5-50 acre piece of land zoned agricultural, costing less in taxes and at the very least, leasing out horse boarding or commodity growing rights to another farmer? There are ways to do this without massive lifestyle shifts.

Tim congrats on a thought provoking thread....
I've honestly never thought of my residence as an income producing asset. That's something I need to consider even as a big newbie. :D