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...analyzing real estate "gains". ( Read more... )
You take Bob's $360,000 home value and subtract the $45,500 annual expenses, $57,500 borrowing costs, $50,000 down payment and $189,000 loan balance. Result: Bob is left with just $18,000 -- and $11,000 of that came from loan repayments.
Bob is looking a little miffed. But before he gets whiny, you go for the kill. What if he sold the place and paid a 5% real-estate broker's commission? Knock off the resulting $18,000 commission, and suddenly Bob's brilliant home purchase doesn't look so brilliant.
At this juncture, Bob storms off to the kitchen, where he pours himself a stiff drink. That is a shame, because you never got around to telling Bob that his house was indeed a decent investment. After all, he got to live there for five years without paying any rent.
But Bob probably wouldn't have been interested. Buying a home so you have a place to live? In today's overheated real-estate market, that's way too radical a concept.
You take Bob's $360,000 home value and subtract the $45,500 annual expenses, $57,500 borrowing costs, $50,000 down payment and $189,000 loan balance. Result: Bob is left with just $18,000 -- and $11,000 of that came from loan repayments.
Bob is looking a little miffed. But before he gets whiny, you go for the kill. What if he sold the place and paid a 5% real-estate broker's commission? Knock off the resulting $18,000 commission, and suddenly Bob's brilliant home purchase doesn't look so brilliant.
At this juncture, Bob storms off to the kitchen, where he pours himself a stiff drink. That is a shame, because you never got around to telling Bob that his house was indeed a decent investment. After all, he got to live there for five years without paying any rent.
But Bob probably wouldn't have been interested. Buying a home so you have a place to live? In today's overheated real-estate market, that's way too radical a concept.
