Your Home As An Investment, Is It a Good One?

Is real estate a good investment?

The article that follows brings up a very interesting point about real estate. Most people buy real estate for their personal use, while also considering it an investment.

In comparison, stocks are strictly investments and do not provide any other tangible benefits like real estate that you can live in, raise a family in and enjoy your life in.

When comparing real estate to the purchase of other items for personal enjoyment, such as cars, boats, jewelry, etc..., real estate over the long-term appreciates, while those other items lose their lustre and depreciate in value.

When considering the investment side to real estate, I like the analysis made below. Check out how certain stocks compare to real estate over the last ten years approx.


Via Jim Frimmer, Realtor and CDPE, Mission Valley, CA DRE #01458572 (Century 21 Award):

Is real estate a good investment?

Real estate is often compared to stocks and bonds to determine which is the better investment. Unfortunately, people who were buying real estate a decade ago thought that their real estate WAS a stock or bond, and they tried to time it right when they were buying and a couple of years later when they were selling.

REAL ESTATE IS NOT STOCK!

But it is an investment, an investment in your life and that of your family.

If your intent is to buy a home to live in, raise a family in, retire in, and perhaps even die in, real estate is a great investment, regardless of when you buy.

If you bought a $100,000 condominium in San Diego County in January 2000, you would have a condo valued at $154,000 today. That's even after the enormous valuation increases in the early 2000s and the enormous valuation declines in the late 2000s.

Stocks, on the other hand, are hit and miss, as we can see in the following examples. If, on January 3, 2000, you bought $100,000 worth of shares in:

* Apple, you would have $359,230 today.
* IBM, you would have $141,655, still not as good as your condo.
* Walmart, you would have $79,643.
* Microsoft, you would have $59,388. Whoever thought ten years ago that Microsoft would be anything but the biggest and the best.
* AIG, you would have $22,051 today.
* Delta Airlines, you would have $14,440 today.
* Lehman Brothers, you would have $0.00 today. They don't exist anymore.
* Borders Books and Music, you would have $0.00 today. They are in liquidation.
* General Motors, you would have $0.00 today. They went bankrupt. Of course, you could have bought some of their new shares when they came out of bankruptcy.

I tried to make that portfolio somewhat diversified — technology, retail, insurance, travel, auto — to help cover some losses, but as you can see, real estate held its own versus the stock big boys.

I included stock splits, although there was only one that was relevant for the time period. I did not include dividends, but I also did not include the significant tax advantages of owning a home, not to mention that you were living in it and enjoying the American dream!