Home is an investment

Legacy_user · 13 June 2017 at 5:57PM

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

bowlhead99 · 13 June 2017 at 6:37PM

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 · 13 June 2017 at 6:42PM

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.

System · 13 June 2017 at 7:04PM

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 · 13 June 2017 at 7:18PM

MatthewAinsworth wrote: »

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

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.

bowlhead99 · 13 June 2017 at 8:24PM

MatthewAinsworth wrote: »

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

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.

System · 13 June 2017 at 9:48PM

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 · 14 June 2017 at 9:36AM

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 · 14 June 2017 at 10:16AM

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 · 14 June 2017 at 10:41AM

MatthewAinsworth wrote: »

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

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.

AnotherJoe · 14 June 2017 at 11:16AM

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)

Home is an investment

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