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Recalibrating Real Estate Expectations

4 January 2010 2 Comments

Real estate isn’t a topic that I discuss much on this blog since real estate as an investment is practically dead in this country.  When it comes to real estate, “hanging on” for dear life is a more apt description.

Many people, including myself, have found it necessary to change the expectations with regards to real estate holdings as we look to the future.  No longer do we look at our current home as our temporary home for a few years until we upgrade to something better.  We’re starting to view our current residence as more permanent, where we now can see living in it for 10, 15, 20+ years.  This is a direct correlation with no longer assuming ever increasing income as we look to the future.

If we view our home as a more permanent residence, the key is to maximize its potential and its value.  A big part of that in my opinion, is maximizing the living space.  Currently, I have a patio and backyard that is very under-utilized.  Because there hasn’t been anything done to it to make it more livable or usable, it is often ignored.  Add a brick patio, some lawn furniture, some landscaping for privacy, etc. and we can transform our backyard into a very livable space.  By doing so, we add to the value and uniqueness of the house while feeling “less cramped” as we expand our living space.

Additionally, I look to my garage as a space to potentially create my home office.  Currently, I have a small desk in my living room that I use for my computer.  As we fill our house up with kids and gear for kids over the coming years, it might become more necessary to move my work space elsewhere.  This will become increasingly important if I make strides toward my goal of working from home operating web businesses as my primary income.  Turning a garage into a usable office will require the right items, organization and a little creativity, but it is definitely doable.

How have you had your expectations towards real estate realigned by the massive housing downturn?  Do you know plan on staying put longer than you did previously?  Share your comments below.

2 Comments »

  • jacob@ERE said:

    I see maximizing living space as a liability unless there is an intention to have many children or have the in-laws and Uncle Bob move in to share the costs. My expectations have changed in the sense that I do not/no longer trust the financial markets to behave. Right now all the stimulus money sits on the banks balance sheets but if it ever leaves (in the form of CEO bonuses I presume) we are going to see inflation.
    I would think of real estate as a rent hedge; housing costs being a substantial fraction of my budget.

  • 20smoney (author) said:

    Good points. I agree on the trusting the financial markets.

    With regards to maximizing my living space, its more of me maximizing my space as opposed to "trading up" to a larger space. My goal is to maximize what I have as efficiently and inexpensively as possible. We do have intentions of increasing the size of our family so that is definitely a factor. I.e. we need the bedrooms instead of me having a traditional home office which is why I intend to utilize my garage workspace as an office at the same time.

    An interesting discussion would be real estate strategy if you are assuming high inflation. If high inflation is certain, it would make sense to borrow as much money as possible since the debt will be inflated away. Obviously a risky move though.