Passive Income with Your House

Have you ever thought about your house as a passive income source? Sure, there are property taxes and maintenance costs, but now that house values are back on the rise, your house could actually become a passive income source. No, it won’t produce a monthly deposit into your Paypal account, but it most likely will appreciate in value over time and make for a big gain later in life.

The Benefits of a Home Purchase

There are a few major benefits of purchasing a home, and all together it makes for quite an air-tight argument for your passive income portfolio.

  1. Keeps Up With Inflation – Now that house values have seen their lowest point, there’s nowhere to go but up. And, as we have seen historically, when the cost of living increases, so does the value of your home.
  2. Tax-Free Gains – If you are single, you can earn up to $250,000 on your home and pay absolutely nothing to the government come tax time. If you are a couple, you can earn up to $500,000 on each property without having to pay tax! Now that’s a pretty good investment.
  3. Housing is Back on the Rise – Of course it depends in which area you purchase your home, but in my area, home values are back on the rise. The best time to buy was in September of 2011. Since then, home values have increased over 10%. That’s an average of a 16% yearly return! I’ll take that any day.

Our Experience

We made our first home purchase in August, 2011. We bought it for a steal since it was a foreclosure, and in the past 8 months we have seen the value increase  by over 21%! The original purchase price was $78,000, and today, our property is worth about $95,000. Since we are making a few improvements (at a minimal expense), I fully expect to see another $20,000 added to that value by the end of this year.

Like I said before, we obviously don’t receive a check in the mail for this increase in value, but nothing really has to be done for this investment to grow! That’s why I consider it a passive income. Just think, by the end of this year, we could sell our home for $115,000 and we only paid $78,000. That’s an increase of $37,000 in just a little over a year – and it’s completely tax free! I consider that a great source of income, don’t you?

Have you purchased a home recently? Are you started to see an increase in the value of your home?

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6 thoughts on “Passive Income with Your House

  1. Interesting thought. I’ve never considered home value as passive income, but since you don’t need to do anything you wouldn’t normally do in the course of living there, your argument makes sense. If maintaining your home increases your investment value, that’s a pleasant coincidence!

    1. Yep yep! I don’t feel like we’ve done that much to our home, but it has increased in value quite a bit! I love it!

    1. It has been a rough go for some since they bought at the peak of the market, but for those of us that just bought in recently, I think there’s nowhere to go but up! 🙂

  2. Folks, if you sell your home you may be able to make a gain off of it. Where will you live, though? If you rent, it continues to become more expensive for you to own a home. If you buy another home, you’ll likely buy something similar or better.

    Ways that I can think of where your principal residence is an investment:

    1. You move from a high value area…say inner city San Diego to low density area Kenmare, North Dakota.

    2. You are a carpenter/contractor and you buy an older home, live in it while you fix it up, then turn it around and sell it.

    3. You pass on. Leaving your home as an asset to you children.

    The problem is that you always need some place to live. You can rent or you can buy. Sometimes its better to rent but usually you want to buy a home as early as you can to avoid the long term increase in values.

    1. That’s true Jacob, you’ve always got to live somewhere. I think that in the long-run though, renting your house out would be the best option. Just find another house to reside for a few years while you pay down the mortgage.

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