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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 13th Jun 17, 5:57 PM
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    MatthewAinsworth
    Home is an investment
    • #1
    • 13th Jun 17, 5:57 PM
    Home is an investment 13th Jun 17 at 5:57 PM
    I conclude that when we buy a house to live in, we should consider it a BTL investment, albeit without risk of default on imputed rent and without middlemen like EA's and taxmen, and with easier permission to do things

    The fact remains that we aren't forced to be owners, renting is always an option, we don't have to own the place we live, we could invest in other things

    But when you add capital gains of say 5% to imputed rent of say 6% then the basic unleveraged asset of a house returning 11% in total favours is hard to beat, certainly for the risk level

    Throw in leverage and you have what is likely to be the best investment you'll ever have, although leverage risk is I believe more dangerous than simple crashes that rebound

    You may not see the capital gains before you die, but then that is much like unclaimed DC pension that simply passes on, it doesn't mean the capital gains weren't available to you in life if you decided to sell & rent
Page 1
    • bowlhead99
    • By bowlhead99 13th Jun 17, 6:37 PM
    • 6,480 Posts
    • 11,450 Thanks
    bowlhead99
    • #2
    • 13th Jun 17, 6:37 PM
    • #2
    • 13th Jun 17, 6:37 PM
    Is there any reason why you need to start a new thread for this train of thought?

    On your second-most-recent thread on this board: "Property's equivalent investment allocation" you have already done 4 posts on a 7-post thread about how you think x, or suppose y, or believe you could imagine z, in the context of ascribing a value to the property you live in, and how there are a bunch of tangible financial and intangible fluffy factors about how to value it (in terms of rent saving or sales value or security of tenure and freedom to alter your home) and the relative risks to your returns on this valuable asset compared to other things.

    http://forums.moneysavingexpert.com/showthread.php?t=5663323

    Given that thread's only a day old, do we really need another thread to go over the same ground using different words? I know you like to "think out loud", but really...
    • fun4everyone
    • By fun4everyone 13th Jun 17, 6:42 PM
    • 817 Posts
    • 1,357 Thanks
    fun4everyone
    • #3
    • 13th Jun 17, 6:42 PM
    • #3
    • 13th Jun 17, 6:42 PM
    I don't consider where I live to be an investment as I chose it for happiness reasons, not for money making reasons.

    That said, I do count my equity in it in my "net worth" figure, which some argue against.
    • MatthewAinsworth
    • By MatthewAinsworth 13th Jun 17, 7:04 PM
    • 2,699 Posts
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    MatthewAinsworth
    • #4
    • 13th Jun 17, 7:04 PM
    • #4
    • 13th Jun 17, 7:04 PM
    Bowl - last post was a different concept, a comparison, that raised the issue addressed in this one, that the whole concept of 'home as an investment' is disputed, I feel it warranted more direct addressing. I can go a long period between posts sometimes, and other times one will birth another and quite quickly.
    Also it dried up quickly and a new post is more likely to get bumped, if something isn't much noticed within a day it falls off the radars of a lot of potential audience
    • Thrugelmir
    • By Thrugelmir 13th Jun 17, 7:18 PM
    • 54,332 Posts
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    Thrugelmir
    • #5
    • 13th Jun 17, 7:18 PM
    • #5
    • 13th Jun 17, 7:18 PM
    The fact remains that we aren't forced to be owners, renting is always an option, we don't have to own the place we live, we could invest in other things
    Originally posted by MatthewAinsworth
    Having aspirations to better oneself is positive for the wider economy. Life is a roller coaster though. So many unknowns lie ahead. There's little point in having fixations. Enjoy life instead.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • bowlhead99
    • By bowlhead99 13th Jun 17, 8:24 PM
    • 6,480 Posts
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    bowlhead99
    • #6
    • 13th Jun 17, 8:24 PM
    • #6
    • 13th Jun 17, 8:24 PM
    Also it dried up quickly and a new post is more likely to get bumped, if something isn't much noticed within a day it falls off the radars of a lot of potential audience
    Originally posted by MatthewAinsworth
    Well, it was further down the front page of threads this afternoon which is where I took the link from to put it onto this one... Generally bumping is discouraged, because if something "dries up quickly" it implies there​ isn't a critical mass of users who want to discuss what's in it

    Anyway good luck with your conclusions and investing journey.
    • MatthewAinsworth
    • By MatthewAinsworth 13th Jun 17, 9:48 PM
    • 2,699 Posts
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    MatthewAinsworth
    • #7
    • 13th Jun 17, 9:48 PM
    • #7
    • 13th Jun 17, 9:48 PM
    Thrug - you're right, I have other hobbies that aren't seen here, this is one of them to a large degree but the end goal is to not need money, I may seem quite intense just because I'm trying to eek some philosophy out of boring passive investing

    Bowl - perhaps, but these are subjects I've read talked about elsewhere (monevator) and I think we here are a fairly small active community, so it's quite possibly insufficienly assessed

    And I enjoy the conversation, the mental challenge, testing ideas...
    • Ray Singh-Blue
    • By Ray Singh-Blue 14th Jun 17, 9:36 AM
    • 317 Posts
    • 411 Thanks
    Ray Singh-Blue
    • #8
    • 14th Jun 17, 9:36 AM
    • #8
    • 14th Jun 17, 9:36 AM
    As an ordinary guy with a pay cheque and a mortgage, it seems that no matter how much I meddle with my investments, changes in the value of my house will dwarf their performance.

    For example, using the Nationwide House Price Calculator I tracked a change in value of -£130K between 2007 and 2009, and a change in value of +£200K between 2013 and 2017.

    I feel that a house is arguably the Nirvana of passive investment. You buy one unit, and then do nothing much, and then some years down the line you sell or bequeath it. There are ongoing charges, in the form of tax and maintenance. And there are dividends, in the form of imputed rent. But no trading, no speculating, no dipping in and out according to market trends, nothing fancy like that.
    • OldMusicGuy
    • By OldMusicGuy 14th Jun 17, 10:16 AM
    • 89 Posts
    • 132 Thanks
    OldMusicGuy
    • #9
    • 14th Jun 17, 10:16 AM
    • #9
    • 14th Jun 17, 10:16 AM
    I've always viewed our house as part of my pension portfolio, but maybe that's because I have no DB pensions, only a DC pot. Like Ray says, the nirvana of passive investment (well ok you have to maintain it). Bought for £300k in 1999, now worth in the region of £850k. We have really enjoyed living here but will downsize to release equity (and also give a chunk to our son to get him on the housing ladder) as we enter the next phase of our lives (empty nest retirees).

    You will see the capital gains before you die if you plan for it. We certainly will, as will our son. And as they are not taxed, it would seem madness to not take them before we die. Although there is always the chance a future government may change that......
    • Eco Miser
    • By Eco Miser 14th Jun 17, 10:41 AM
    • 2,891 Posts
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    Eco Miser
    Also it dried up quickly and a new post is more likely to get bumped, if something isn't much noticed within a day it falls off the radars of a lot of potential audience
    Originally posted by MatthewAinsworth
    A new post will bring an old thread to the front, just as much as a brand new thread; and has the advantage of keeping all your thinking on the subject in one place, for easy review by newcomers.

    Also consider that some of us just read the forum once a day, or less, so may not yet have got round to commenting on your previous thread yet.

    Personally, I bought my house to live in for the rest of my life, without rising rent, and without anyone to tell me what I could or could not do with it. It's potential value in 50-60 years time was irrelevant.
    Eco Miser
    Saving money for well over half a century
    • AnotherJoe
    • By AnotherJoe 14th Jun 17, 11:16 AM
    • 6,866 Posts
    • 7,300 Thanks
    AnotherJoe
    A home is an investment, but its also a home, and in most cases its probably at the least 95% home and only 5% investment. An investment is just an investment.

    To conflate the two, risks messing up your home, for example, if a home was just an investment then everyone should just up sticks and buy a home wherever the latest property hotspot is, irrespective of family, friends job etc.

    OTOH i can buy an investment anywhere without needing to uproot myself, increase my commute, or even just keep the house tidy whilst buyers tramp through. (At least, my broker has never given me a low price when selling an investment just because i hadn't decorated recently. Other reasons, such as it was a crap investment, certainly)
    • MatthewAinsworth
    • By MatthewAinsworth 14th Jun 17, 5:17 PM
    • 2,699 Posts
    • 1,083 Thanks
    MatthewAinsworth
    Another Joe- I think we should only buy property that we'd hypothetically be prepared to rent, because otherwise the biggest part of the return, the imputed rent, is wasted. Buying in property hotspots is like buying growth stock rather than value stock, and again may not be best use of imputed rent

    Ecomiser - so in your case the imputed rent (dividend) outweighed capital gains, but making rent imputed is a financial decision when you could invest instead

    And ray, indeed ultimate passive, that's why I think most people are better at property than stocks
    • Anthorn
    • By Anthorn 15th Jun 17, 11:09 AM
    • 3,043 Posts
    • 786 Thanks
    Anthorn

    You may not see the capital gains before you die, but then that is much like unclaimed DC pension that simply passes on, it doesn't mean the capital gains weren't available to you in life if you decided to sell & rent
    Originally posted by MatthewAinsworth
    I'm not so sure that property whether bought as one's home or as a buy-to-let is an investment. Personally, I would regard it a fixed capital asset.

    Another Joe- I think we should only buy property that we'd hypothetically be prepared to rent, because otherwise the biggest part of the return, the imputed rent, is wasted. Buying in property hotspots is like buying growth stock rather than value stock, and again may not be best use of imputed rent

    Ecomiser - so in your case the imputed rent (dividend) outweighed capital gains, but making rent imputed is a financial decision when you could invest instead

    And ray, indeed ultimate passive, that's why I think most people are better at property than stocks
    Originally posted by MatthewAinsworth
    There is a different track where profit from one's house can be realised almost accidentally: This is where an older individual or couple are left to live alone possibly through children growing up and leaving home and they don't need such a large property. This is "Downsizing" where the house is sold and a smaller property bought with the profit possibly banked or invested. It could also be that the house is sold and a new property rented, again with the profit possibly banked or invested.

    It's not just a simple case of buying to live in nor a simple case of buying as an investment. There are other avenues to consider in which, as I said, property is a capital asset.
    • AndyT678
    • By AndyT678 15th Jun 17, 11:38 AM
    • 692 Posts
    • 921 Thanks
    AndyT678
    I'm not so sure that property whether bought as one's home or as a buy-to-let is an investment. Personally, I would regard it a fixed capital asset.
    Originally posted by Anthorn
    Before this starts any confusion, of course a house is an asset. But investments and fixed assets are not mutually exclusive.

    An investment is something you buy with an expectation of a profitable return.

    Fixed assets are things you own which have a value and a useable life normally > 1 year.

    A BTL property is clearly both. A car is certainly an asset but unlikely to be an investment. The pint of milk in your fridge is neither.
    • MatthewAinsworth
    • By MatthewAinsworth 15th Jun 17, 1:15 PM
    • 2,699 Posts
    • 1,083 Thanks
    MatthewAinsworth
    Leasehold would be an expiring asset unless it's lease length is over at least 80 years

    Anthorn - indeed downsizing, or sell&rent is available at any time
    • Eco Miser
    • By Eco Miser 15th Jun 17, 9:56 PM
    • 2,891 Posts
    • 2,680 Thanks
    Eco Miser
    Ecomiser - so in your case the imputed rent (dividend) outweighed capital gains, but making rent imputed is a financial decision when you could invest instead
    Originally posted by MatthewAinsworth
    That may have been a factor, but the main driver for buying was the security of tenure "to live in for the rest of my life".

    Back then with no internet platforms and 5% initial fees and hidden ongoing costs, I wouldn't have bet on investments beating rent rises.
    Eco Miser
    Saving money for well over half a century
    • economic
    • By economic 15th Jun 17, 9:58 PM
    • 1,580 Posts
    • 737 Thanks
    economic
    Before this starts any confusion, of course a house is an asset. But investments and fixed assets are not mutually exclusive.

    An investment is something you buy with an expectation of a profitable return.

    Fixed assets are things you own which have a value and a useable life normally > 1 year.

    A BTL property is clearly both. A car is certainly an asset but unlikely to be an investment. The pint of milk in your fridge is neither.
    Originally posted by AndyT678
    a pint of milk is an asset - it keeps you alive and therefore has value - unless you value your life as zero.
    • Tarambor
    • By Tarambor 15th Jun 17, 10:31 PM
    • 887 Posts
    • 589 Thanks
    Tarambor
    Where are these capital gains of 5%? Where I live property is the same price as it was in 2008, its not risen at all.
    • AndyT678
    • By AndyT678 16th Jun 17, 8:33 AM
    • 692 Posts
    • 921 Thanks
    AndyT678
    a pint of milk is an asset - it keeps you alive and therefore has value - unless you value your life as zero.
    Originally posted by economic
    Keep it for a year and see how much value you think it has then...
    • Malthusian
    • By Malthusian 16th Jun 17, 9:43 AM
    • 2,393 Posts
    • 3,320 Thanks
    Malthusian
    Only one legitimate way to sort out a debate about semantics - etymology! The word "assets" comes from Old French asez and in turn Latin satis meaning "enough", so to "have assets" is to "have enough" i.e. to repay one's obligations. A house is an asset because it stores value and if you have a house you can sell it to pay off your debt. A pint of milk is not because the chances that your creditors will accept payment in milk that is already on its way to perishing is vanishingly small.
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