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Home as an Investment!

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@azircon
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Home as an Investment!

In the United States, anything related to price, sale or rent of a home is public information. Anyone can search how much one paid for a house, how much is the tax, rent...whatever. These are all part of the public record and by law is accessible to anyone interested. There are excellent websites and tools available for free to track, analyze real estate listing, price change, rental history whatever you need! It's perhaps no surprise, as other that weapons and war machines, the only other thing the United States make profitably is HOMES!

This leads to the concept of Americian Dream (the modern version), which is proposed by President Bill Clinton:

In May 1995, President Bill Clinton released the National Homeownership Strategy (US Department of Housing and Urban Development 1995), an 87-page, 100-point plan with the goal that it would “boost homeownership in America to an all-time high by the end of the century.”

I am not here to judge whether it was good or bad for the United States or not. I am not here to judge whether it is good now or not, either. Point is, people have benefited from this major social desire for home ownership, and it is currently the economic backbone of the US society. Just for reference, the original source of the "American Dream" ethos is rooted in the Declaration of Independence.

The American Dream is rooted in the Declaration of Independence, which proclaims that "all men are created equal" with the right to "life, liberty, and the pursuit of happiness."

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Above is a typical American home. I am not saying its an average home, its NOT. But certainly it is typical. Let me explain the difference. I live in Houston, TX and therefore most familiar with the local market; where currently the Median home price is $345 K. This is public information. The home I picture above is certainly more than Median price by a factor 5X.

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The point is that $1.6M home belongs to a relatively simple middle class couple with two kids (not me). They are in no way rich. They are both professional musicians. One plays wind intruments and the other violin. No, they are not part of any famous band, just regular classical opera and symphony respectively. Both their kids go to public school. They are not rich by any standard and live a middle class modest life in Houston.

What did they do right?

Well there are many things they did right:

  1. This is the home they live, their primary residence, not an investment property.

  2. They bought about 10 years back, it was market high back then, but they still bought as they needed a home.

  3. It is a great location, and only gotten better over the last 10 years.

  4. They lived here, didn't move.

  5. They got a cheap mortgage. Under 5% on a 30-yr-fixed.

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They bought the house in 2012. Mind you, Houston is not a hot housing market like South Florida or Coastal California. A 60% rally is not much in 10 years. Especially for you folks in crypto you will say that only 6% gain per year on average in nothing! And you are generally correct. But, I have news for you. Many of you make 100% gain in a month, right? How much capital do you invest? $100? $1000? :) Yeah! there you go. Percentage is a bitch! Right? LOL!

The allure about investing money in your primary residence is the loan or mortgage you get is considered low cost and low risk (yeah, I know!). However, in this case, it really was and is. These are folks in a stable job that is relatively recession proof. They got a nice low interest fixed rate long term home loan. 10 years of it already paid off. They plan to stay here rest of their working life. This is rare. As typical life span of a 30 year fixed rate mortgage is about 5 years!

These folks are certainly outliers. They are average middle class, hard working American who made simple financial choices and will get paid handsomely for it. They have a beautiful home and they are invested in it and the community. The true American Dream!

Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.

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