wrote in message
oups.com...

NOYB wrote:
wrote in message
ups.com...
Here's the real life example:
I paid $825k for the current home on the water.
The last house to sell just like mine sold for $1.225m.
After realty and closing costs, I'd clear about $360k

I sold my old house for $560k last year (not on the water)
The last house to sell like my old one just sold for $625k.
If I bought the new house for $625k, after closing costs, I'd be in
it
for
under $650.


So I would net a quarter of a million dollars if I sold my current
home
and
bought my old one again.


That's profit, right?


*****************

No, it's merely the reorganization of numbers on the asset side of
your
balance sheet. Even if your house was in investment, you haven't
realized a gain until you sell it. Your neighbor's sale didn't put
any
money in your pocket. You need the house to live in. The amount of
money the house is worth is meaningless, as long as you are going
to
personally consume the asset by taking it for exclusive use.

The good news is that if the average income in Nipples doubles in
the
next couple of years, (is that likely?) your $1.2mm pad will be
"worth"
$2.4mm. The bad news is that if you sell the one you've got, and
don't
elect to lower your standard of housing, you'll simply have a
higher
number attached to an asset you don't have the flexiblity to sell.

Now, it you had purchased *two* or more homes for $825k and sold
oneof
more of them for $1.225, that $400k spread would indeed be gross
profit. You'd probably walk off with about $300k net after
commissions, cap gains taxes, local conveyance taxes, etc. Selling
your
personal house, and immediately replacing it with one costing as
much
or more, does not create "profit".


Another example for the slow and/or stubborn:

Chuck has $100k. He buys a house not on the water for $500k, and
puts 20%
down. His mortgage is $400k. In one year, he sells the house for
$575k.
He pays off the mortgage and the realtor, and walks away with $135k.


NOYB has $100k. He buys a house on the water for $1m, and puts 10%
down.
His mortgage is $900k. In one year, he sells the house for $1.5m.
He pays
off the mortgage and the realtor, and walks away with $510k.

They both decide to buy a new home next to each other. The purchase
price
is $500k. Chuck puts $135k down, takes out a new loan for $365k.
NOYB pays
cash...and uses the extra $10k leftover to buy a trailer for his
boat...and
a new T-top, kicker motor, and fishfinder. The money that NOYB would

normally pay towards a mortgage on a home now goes towards buying a
second
home in the mountains.

Chuck says "How the hell did that happen!?!?"

Yeah, how DID that happen, when you've stated here that you have an
interest only mortgage? Not only did you NOT pay cash, you're not even
paying down the balance.


Appreciation you dimwit.