“How can you just move?” He was half unbelieving and half accusatory. I found myself searching for an answer. This is a house that I raised the family, had numerous backyard BBQs, poured in tears, sweat and blood, and spent countless hours cleaning, fixing, and repairing. It was my American dream, my land, and my home. I grew old here. How can it be possible that I would leave and sell it?
Well, it was done. Escrow closed, money changed hands, deed recorded, and addresses changed. It is no longer mine. Wife and I stared at the bank account and were amazed that our home has become a number. (That’s my agent, Jim Song.)
I cannot resist thinking it as an investment. At first glance, the sold price and the purchase price represents multiple times of increase. That seemed impressive until I checked out Dow Jones index. Both performed slightly more than 6% annually over the same period of time. (Average inflation was about 2.8%.) I guess it did OK, but not spectacularly.
And the net increase does not represent the whole truth. We remodeled about 10 years ago, changed roof twice. Re-piped. Re-landscaped. More importantly, we made mortgage payments every month. We were feeding this house all those years.
A more reasonable approach is to treat all the cash payments over the years as investments and the net gain today as the payout. I fed all those and taxes (income tax, property tax, and capital gain) into a spreadsheet and out came 3.62%. It is a lousy investment then.
Hold on. Had I not bought the house, I would have to pay rents. Over the years, the rents in our market was about the same as the mortgages. If I add back those “rent savings,” the return would have been 7.86%. It is then a significantly better investment. I feel better.
As I sit in this Seattle downtown apartment looking out to the cityscape, the thought is not whether I made a good investment decades ago. Tonight is for reminiscing all those BBQs and kids growing up and letting nostalgia fill my heart. Tomorrow is another day and I will build new memories here in Seattle.
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