Unpacking the ROI of Home Ownership, Transaction Costs and ... · Buyers and Sellers want expertise...

Copyright 2018, Door®Copyright 2018, Door®

Home as investment?Unpacking the ROI of Home Ownership, Transaction Costs and

Finding New Alternatives

Alex Doubet, Founder & CEO

Copyright 2018, Door®

Who is Door?• Flat-fee residential real estate brokerage •Non-commissioned agents• Specialized model• 400% growth YoY• Industry leading customer satisfaction (NPS score ~70)• Recently closed Series A

Average client saves over $12,000


Industry Shift has Begun

Millennials fastest growing group of home

buyers

Different expectations & requirements

Buyers and Sellers want expertise &

specialization

Old fashioned generalist model not relevant

Buyers and Sellers are now active in the

process

51% of 2016 buyers found their home online

without agent

Technology has brought real estate data to

masses

Agents no longer have an information

advantage

Metrics from the National Association of Realtors (NAR) and Florida Times Union


House is the best investment you can make –and other myths


A Transaction Full of Friction

Researchers asked 2000 people and 61%

ranked moving as more stressful than

anything else they’d experienced, higher

even than divorce.

Source: “Stress of Moving Can Strain Relationships” - Realty.com

Copyright 2018, Door® Source: “Contract to Close Flow Chart” - thesellingedge.com

This is all AFTER you find your home

Finding The Home Is The Easy Part


Myriad Costs Associated With Selling Your Home

Prorated Taxes Title Insurance Carrying Costs

Repairs ???


Selling commissions eat up to 25% of the average homeowners equity

5.2%Average real estate commissions paid


Real Estate Agents Effort Is Tiny By Comparison

12Hours of work in the transaction


True Costs of Ownership

Significant lifestyle bloat comes with home ownership.

"Keeping up with the Joneses”


Home Renovation is an $83B annual market


Without continued investment, homes ultimately begin to return to lot value

$1,175,000


The Appreciation Fallacy – a case study

Bought in 1995 for $305,000

Sold in 2005 for $763,000Assumed mortgage balance was $211,000.

A gain of $551,000

803% return, or 23.4% annualized.

USA Today’s “Why your home is a worse investment than you think”


The Appreciation Fallacy – the reality

$32,000 paid in principal and more than $172,000 in interest.

$18,200 total upkeep

$37,000 property taxes

$55,000 light remodeling for neighborhood expectations

Closing costs and 2005 real estate agent's commission (not included…)

0

200

400

600

800

1000

1200

1400

1600

01/03/9

5

01/03/9

6

01/03/9

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9

01/03/0

0

01/03/0

1

01/03/0

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01/03/0

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5

1995-2005 S&P 500

10.8% annualized 9.52% annualized

USA Today’s “Why your home is a worse investment than you think”


The Appreciation Fallacy – bottom line

Northern California isn’t a good proxy – its too good

Reduced liquidity & increased risk for modest gain

North Texas average annual– 3.88%

https://www.neighborhoodscout.com/tx/dallas/real-estate


The Equity Build Up Myth

A. Mechele Dickerson University of Texas, “The Myth of Home Ownership and Why Home Ownership is Not Always a Good Thing”

Average home tenure 9 years


The Millennials


Declining home ownership percentage by age group in the US from 2000-2015

Source: US Census Bureau, Door Inc.


Young People are Adapting to New RealitiesSharing economy ideas will persist in the 21st century as people pride themselves on access, not ownership


Renting is Almost Always Cheaper than Owning

Source: “Rent or Buy Calculator” - New York Times


Renting is Almost Always Cheaper than Owning in Texas

https://www.nerdwallet.com/blog/mortgages/cost-homeownership-vs-renting

Median Monthly Costs to Own

Median Monthly Costs to Rent

HomeownershipPremium

$1,453 $932 $521

56%Premium


The Millennial Effect

Coincides with deferring marriage, children and other typical life events

However they demonstrate strong personal finance acumen which shows a trend for wealth building outside of home ownership

1 in 6 millennials have saved over $100,000 in either a direct savings account or an investment account

Source: “A new report says 1 in 6 millennials has $100,000 in savings. This is how some found a way to stockpile cash.”Washington Post


So invest in a home?


Growing Populations & Shifting Dynamics


Home Prices Continue to Rise

Case/Schiller Home Price Index – 1990-2017


Homes as “Forced Savings”

US Census Bureau, 2015


What returns are you seeking?

Store of value Memories


Recommendations

Grow Roots CutTransaction Costs

Break-up with HGTV


The Door Dividend

$500FPA client receive an additional $500* at close.

*Either further reducing the selling fees, or increasing their cash back


Q&A

Unpacking the ROI of Home Ownership, Transaction Costs and ... · Buyers and Sellers want expertise...

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