Random Example

The Baglady stopped by Agent Genius the other day to tell me I was rude – that’s a whole different story.  Anyway, I had to pop over to her site to see what she’s about.  She has a lot of very detailed data and some diehard fans.  I had to disagree with some of it – what fun would it be if I didn’t. 

I suggested in my long-winded comment that a better tale of time for the equity earned in owning a home would be ten years.  That depends on which ten years.  But here’s a random example.  I sold this particular house in Pacifica in 2000 for 385,000.  We didn’t know where the market was going then just like we don’t now.  Conservatively that same house would sell for 600,000 today.

Let’s make up some stuff.  Say they had to put on a new roof at about 7,000.  They had a gardener every month for the past 7 years at $45 a month – $3780.  How about a new water heater at $700.  The fence blew down in a storm, another $7,000.  They’ve written off their loan interest payments on their taxes – I have no idea what that would amount to.  So let’s leave it off.  They also deducted any loan origination fees they paid at the time of purchase – also not included here.
Okay, so let’s pretend they want to sell.  600,000 at 6% sales commission.  There are other fees for them in a sale.  Let’s pretend they amount to $3000.

Add it up: 7000 roof,  3780 gardener,  700  water heater,  7000 fence, 36000 sales commission,  3000 misc fees, 33691 property taxes for 7 years (also tax deductable) 

Total 91,171

Equity Gain minus expenses 123,829

Net profit divided by 7 years  =  17,690 per year

 divided by 12 months =   1,474 per month added to their net worth

Now, keep in mind, most of those expenses have already been paid.  They’re not taken out of the proceeds at the time of the sale.  They’re an investment in their asset.  So more of that calculator. 

They bought for 385,000.  They’re selling for 600,000 – should be more like 675k but I’m being conservative, remember?

They’ll walk away with a check for $176,000, tax free because they lived in their principal residence for 2 of the past 5 years.

I don’t know about you, but it would be near impossible for me to save $1,474 a month. 

Vicki Moore About Vicki Moore

RE/MAX Star Properties
282 Redwood Shores Parkway
Redwood Shores, CA 94065

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  1. Lani Anglin says:

    Great example, Vicki!

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