Comments on No Debt MBA: Your home is an investment... whether you like it ...

To be fair, the Case Shiller home index is inflati...

2011-06-26T16:51:16.803-07:00

To be fair, the Case Shiller home index is inflation-adjusted. The returns, then, are inflation plus .3% annualized, which is better than the rate on CDs and t-bills.

I still think homes are a pretty poor investment, and a single home should never be labeled as such.

I don't see how anyone can deny that a home is...

2011-06-24T19:29:35.570-07:00

I don't see how anyone can deny that a home is an investment. Yes it costs money to maintain and doesn't generate any income while you live in it, but not all of those costs should be attributed to the house.

YOU need a place to live, those are your expenses. The house's return is the rent it saves you less maintenance and taxes.

To get technical, you shouldn't be using that same hypothetical 6% return because rents are increasing and a inflation protected. Can't say the same about a nest egg of bonds generating 6%. Not a big deal, just a nit pick.

Other than that agree 100% that purchasing decisions should be based on valuations. I think the pendulum's swung really far from "a home is always a good investment" to "it's always better to rent". - I'm just basing that on anecdotal evidence of people I talk to and blogger posts.

Depends on location, location, location, doesn'...

2011-06-23T19:07:51.770-07:00

Depends on location, location, location, doesn't it? Getting a great deal on a duplex in Detroit or Youngstown, not so comparable to other growth areas like Raleigh-Durham or Alexandria, VA.

I think when people say "investment" the...

2011-06-23T17:43:11.964-07:00

I think when people say "investment" they mean it will generate a certain return over time. For me, owning a home is a critical part of my early retirement plan, as housing costs are more than half of my expenses. I don't really care what you call it. :)

I like the idea of investments being things which ...

2011-06-23T17:37:33.630-07:00

I like the idea of investments being things which put money in your pocket (I can't remember if that's Jacob's definition or someone else...?) so in that sense, a house really doesn't qualify. Even if the house appreciates, consider it's nature as a spending magnet: you buy tools to take care of it (lawnmower, alarm systems, etc), furniture and stuff to fill it, insurance to protect it, foot ongoing bills for maintenance (furnaces and roofs and plumbers, etc), pay yearly property taxes... I'm sure there are ways to balance all of these and come out ahead, so by your terms it's merely an illiquid investment - but it seems to qualify only by technicality.

But I think the most meaningful question is not whether the house "counts" as an investment or not, but rather whether it facilitates or undermines the goal of financial independence. As you point out, if the calculations work and you pick a property that doesn't beguile you into developing a high spending lifestyle, then awesome, do it. The trick lies in realistically assessing what home ownership will do to how you live.

And congrats on your plan to do school debt free and in service of long term independence goals! :)

TR - Unfortunately the scholarship opportun...

2011-06-23T09:44:59.665-07:00

TR - Unfortunately the scholarship opportunities for MBAs are much more limited than those for undergrads. Most top programs offer little to no merit aid and having a high GMAT score is not enough since everyone has them just to get in. Same goes with third party scholarships - a high GMAT score is a requisite to get your foot in the door, not nearly enough to land you the money. Scholarships would definitely help, but they are hard to find and harder to win.

Maybe I need to make a contact me page if it's not obvious. My email is in About right now. Thanks for the feedback!

An unrelated question, since I can't find your...

2011-06-23T09:39:10.410-07:00

An unrelated question, since I can't find your contact info. You have a post on get high gmat scores. Is it possible to get scholarships based solely on gmat? I would think one of the best ways to graduate with no debt would be to get scholarships.