unpacking the roi of home ownership, transaction costs and ... · buyers and sellers want expertise...
Post on 18-Aug-2020
4 Views
Preview:
TRANSCRIPT
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
Copyright 2018, Door®
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
Copyright 2018, Door®
House is the best investment you can make –and other myths
Copyright 2018, Door®
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
Copyright 2018, Door®
Myriad Costs Associated With Selling Your Home
Prorated Taxes Title Insurance Carrying Costs
Repairs ???
Copyright 2018, Door®
Selling commissions eat up to 25% of the average homeowners equity
5.2%Average real estate commissions paid
Copyright 2018, Door®
Real Estate Agents Effort Is Tiny By Comparison
12Hours of work in the transaction
Copyright 2018, Door®
True Costs of Ownership
Significant lifestyle bloat comes with home ownership.
"Keeping up with the Joneses”
Copyright 2018, Door®
Home Renovation is an $83B annual market
Copyright 2018, Door®
Without continued investment, homes ultimately begin to return to lot value
$1,175,000
Copyright 2018, Door®
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”
Copyright 2018, Door®
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
7
01/03/9
8
01/03/9
9
01/03/0
0
01/03/0
1
01/03/0
2
01/03/0
3
01/03/0
4
01/03/0
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”
Copyright 2018, Door®
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
Copyright 2018, Door®
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
Copyright 2018, Door®
The Millennials
Copyright 2018, Door®
Declining home ownership percentage by age group in the US from 2000-2015
Source: US Census Bureau, Door Inc.
Copyright 2018, Door®
Young People are Adapting to New RealitiesSharing economy ideas will persist in the 21st century as people pride themselves on access, not ownership
Copyright 2018, Door®
Renting is Almost Always Cheaper than Owning
Source: “Rent or Buy Calculator” - New York Times
Copyright 2018, Door®
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
Copyright 2018, Door®
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
Copyright 2018, Door®
So invest in a home?
Copyright 2018, Door®
Growing Populations & Shifting Dynamics
Copyright 2018, Door®
Home Prices Continue to Rise
Case/Schiller Home Price Index – 1990-2017
Copyright 2018, Door®
Homes as “Forced Savings”
US Census Bureau, 2015
Copyright 2018, Door®
What returns are you seeking?
Store of value Memories
Copyright 2018, Door®
Recommendations
Grow Roots CutTransaction Costs
Break-up with HGTV
Copyright 2018, Door®
The Door Dividend
$500FPA client receive an additional $500* at close.
*Either further reducing the selling fees, or increasing their cash back
Copyright 2018, Door®
Q&A
top related