After 5 and a Half Years I Sold My Home and I Don’t Think I Made Any Money

I sold my home yesterday.  I don’t think the fact has really sunk in since I am not moving out until early next month, but it’s a pretty big deal!  The home is not like other homes as it is part of a public housing program to keep young professionals on Long Island.   The program worked as follows:

  • In a neighborhood of 130 55+ town homes 28 units were designated “Next Generation”
  • Those 28 units had over 300 applicants when the program was announced in late 2006.
  • There was a lottery. I was chosen as number 8
  • That allowed me the opportunity to purchase the home for $250,000 which was significantly under market value in 2007 (even at the sale price of $298,000 I would say it is still $100K or $125K under market value)
  • The sales price was connected to a formula that is tied to the town’s income not home values
  • Any New Purchaser must be a first time home buyer
  • The property must be used as a main residence (i.e. I can’t rent it).

So despite the worst housing correction in a generation I sold the property for a price $298,000 (maximum asking was $304K plus capital improvements).  So I made a quick 20%, right? Not a chance and that is what I am curious about calculating. 

Calculating if I Made Any Money on my Home Sale

As I deposited the checks today, I felt weird as I no longer owned the home that I really did/do love.  I know we all look at the past in rose colored glasses but the the memories I have of this place bring a smile to my face.  The Wife and I closed on the home about a year after I was out of law school and I was transitioning from my first job which I hated to the one that I still have now! I bought the house with The Wife before we were even married! It really does make me sad to think about leaving the place but I think that is because I am not particularly good with change.

The two things that may seem odd to others that I’ll miss are (1) Coming home for lunch to see The Wife and The Boy and (2) my neighbors.  My neighbors freaking rule and when we were younger this meant black out nights with no driving but lately that means just a few beers when nothing is going on or a random BBQ on our shared driveway.  Enough with the nostalgia! Lets do some math

How Much Interest Have I Paid on my Mortgage in 5 and a half Years

As most people know, a traditional mortgage is set up as a self completing amortization schedule where the amount you pay per month is the same but the percentage going to your interest versus your principal changes over the life of the note.  Most of the interest is paid up front while major leaps in the principal occur at the end of the note.  I threw my variables into a mortgage calculator:

  • 40 Year Note (I was the only one on the mortgage and deed so I had a Debt to Income Ratio issue)
  • 5.875% – good at the time but a terrible rate now
  • Was at the home for 66 months – June 13, 2007 to December 10, 2012

This leads us to $73,714 in interest payments alone.  My Taxes have ranged but lets call it an average of $5k/yr for the 5 and a half years – another $27,250.  Lastly, we have maintenance payments of $300 x 66 months $19,800.  So ignoring upgrades (of which we did few) and repairs (of which we did very few) we have a total cost of about $121,000. That is a lot less than my gain, huh?

If we are going to get specific the taxes and interest payments were tax deductible.  Assuming a 20% effective tax rate then we have about $20,000 in deductions bringing the number down $100,000.

Would I do It Again?

1,000%.  I believe the calculations I did are what most people would encounter if anyone did the math on their main residence.

27 Responses to After 5 and a Half Years I Sold My Home and I Don’t Think I Made Any Money

  1. It doesn’t sound horrible to me – interest / 66 * .8 = $893.50 a month in ‘rent’, plus appreciation on top of that. I’d say that you beat the alternative of renting, unless you could live somewhere locally to you for, say, $600 a month? No?

    • There are no places by me for $600 nevertheless one like mine. Just don’t like when people think that a gain is a gain when it really isn’t…more like a forced savings account with a negative return lol

    • Absolutely a win but it is a terrible investment if you ask me, but I think almost all main residences are going to have a similar return unless you are there for 15 or 20 years

  2. You may have ended up in the negative, but you had a great place to live for 5 and a half years, made friends, and enjoyed your life.

    Don’t forget to balance that against rent you would have had to pay if you didn’t purchase the house. Say $1000/month rent for 66 months? That $121,000 becomes only $55,000 and you’re just about breaking even.

    • Evan,
      I’m with Mike on this one. Like you said, you have fond memories of this residence. If you were stoked to be moving out AND you saw it as a bad investment, that’d be way worse.

      Yes, it’s quite a bit of money, but it sounds like it was a priceless 5.5 years with your bride, kid and friends.

      Now I’m wondering: What’s next? Where are you moving?

      -Christian L

    • I live by you buddy…$1k? More like $2,000 to $2,500 for an equivalent place which I guess puts me ahead. That still doesn’t change the fact, though, that it is not a great return on one’s investment despite what most people think

    • Oh no I didn’t believe I would strike it rich. Just wanted to break down the notion that most people believe the gain on their main residence is Sale price Minus Purchase price.

    • Selling is much more emotional but buying is much more stressful (probably because the buy part is The Wife and I working together to find a place lol)

  3. Yeah, I think buying a house is good in general, but it’s not going to make you rich unless you’re really lucky. We all move so much these days that it’s rare to get the house paid off. That’s too bad. Good luck with your move.

  4. It’s true and most people don’t factor that in. By the time one factors in any renovations/improvements, interest paid and other fees along the way and to realtor’s an lawyers how much does one actually make? I suppose in our case our case if we sold our home today almost 4 years after purchase we would stand to sell if for $100k more or close to it. Minus off all the above and how much did we actually make? Interesting.. Great post and happy to hear you sold your place! It’s always about memories rather than money though as we can’t always get back what we’ve spent with a house. Mr.CBB

    • My mortgage was many multiples of $300? My maintenance was just $300. I am on Long Island there isn’t a $300 rental probably within 50 miles of me lol

  5. If you broke even, you didn’t do badly.

    Interest payments are ruinous…over 30 years, they can easily double the amount you pay on a house. Then you have closing costs and Realtor’s commissions. It all adds up to a monstrous gouge. Maintenance…well, that’s the cost of doing business, as it were.

    In the present economic climate, IMHO, breaking even is about the best a person can hope for. Just think of what you’ve paid as rent. With a small tax deduction entailed.

    • Not complaining about what I paid, but rather the preconceived notion that most people have that your gain is sales price minus cost basis.

      I am afraid of the closing costs on the next house lol!

  6. First off, congrats on the sale! Selling a home these days is tough and if you can break even well, that’s pretty good.

    Now, never mind that people don’t understand what a real gain is, people need to understand you buy your main home to live in it. It’s not an investment in the typical sense. Should you come out ahead then that’s awesome. Otherwise be happy you have a great residence that works for you and you family (which I think you were happy about). Your investment in in the neighborhood and how you will be living.

    You paid into what you used and hearing you talk about missing the place it sounds like you got great value out of it.

    Best of luck on the new place!

    • Thanks! I got a lot of value. A TON of value, more than I could have ever hoped for. It is just amazing how many people really do believe that their home is their number one investment.

  7. I guess you have to consider paying for rent somewhere if you were in the home. So if rent is put into perspective it shouldnt be that bad of course its not like you made money off the sale but was it suppose to be an investment?

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