Is your home an investment?

[benchmark]

A home is never an investment it is first and foremost a place to live.

 

If a home is never an investment, then it's never a good idea to pay off a mortgage if you can leverage with a lower mortgage rate, assuming that you can generate a higher return rate?

[Uccmal]

If a home is never an investment, then it's never a good idea to pay off a mortgage if you can leverage with a lower mortgage rate, assuming that you can generate a higher return rate?

 

This is something I have given some thought to.  However, if you want to live off your investments, then you certainly want to minimize your fixed costs. 

[vinod1]

I am getting a good deal renting a home in Montecito for about a 3.1% net rental yield.

 

I could own a REIT in my RothIRA yielding 6% and easily cover that rent -- nearly 1/2 the cost of ownership. 

 

To other folks it's harder if that yield is taxable -- especially in California with the added state income tax.

 

 

How do you calculate the net rental yield? Is this the yield after paying the mortgage?

 

Thanks

 

Vinod

 

I'm figuring if he had no mortgage -- he has my rent checks and he has to pay for property tax and other things.  The remainder of cash he has left at the end of the year after expenses, I'm guessing is about 3%.

 

That's 3% of what I think the property is worth, but my valuation estimate is about 77% of the tax assessed value appraisal.  If the tax assessor is more accurate then it's only a 2.8% yield.

 

I am scratching my head on how this could be an attractive investment or is there is a non economic reason for this investment?

 

Vinod

 

Owner bought the house in 2007 for 2.2m, sunk "about a million" into upgrades/renovations, and is holding onto it until he can get his money back out.  He moved into a lower cost home after having some health deterioration and needing a care giver.

 

You should see some of the homes for rent in Montecito, it's hysterical.  www.realtor.com

 

Thanks. I misunderstood. I thought you bought the house and renting it someone else, I did not realize it is the other way around.

 

Vinod