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I’ve spent a fair amount of time documenting my financial journey here on HumbleDollar. Some regular readers might remember me documenting both the purchase of a home (in 2018) as well as the sale of that home (in 2022). I purchased the house (an 1100 square foot ‘starter’) for $375,000. I sold it for $600,000 cash.
I recently saw that the house changed hands again. The numbers, however, tell a sobering story: this time it sold for $500,000.
In less than four years, the property lost $100,000 in nominal value. When I sold it, the buyers appeared to be parents purchasing the home for their adult child. While the intent—providing stability and a “foot in the door”—was undoubtedly paved with good intentions, the math suggests a different reality.
A $100,000 drop in sale price is only the tip of the iceberg. Based on the listing photos and description it seems that after I sold it, the owners invested in a new furnace. It also appeared like they needed to replace a large section of wood fence in the backyard. I suspect they also had to deal with cutting down a very large fir tree. They listed the house with a realtor which means a standard 5% commission wiped out another $25,000.
If those parents had taken that $100,000 loss—plus the roughly $30,000-$40,000 in transaction fees, repairs and maintenance costs—and used it to subsidize a very comfortable rental for their child, it seems like the financial outcome would likely be far superior. They would have preserved their principal, stayed liquid, and avoided the headache of a depreciating asset in a shifting market. To be clear, I have no idea if they had planned on the house being a short-term investment or not.
We often conflate “home” with “investment,” especially when family is involved. But real estate is a concentrated bet. When that bet goes sideways, it doesn’t just hurt the balance sheet; it’s a missed opportunity to build generational wealth in more efficient ways.
For those considering a similar path for their heirs, it’s a reminder to run the numbers without the rose-colored glasses of home ownership.
What do you think? Would you choose the “stability” of a home for a family member if you knew the market might take a six-figure bite out of your legacy?
I cover the rent on a property for one of my daughters. The idea of buying a place has crossed my mind more than once, but her volatile and impulsive nature has always stopped me from doing so. For all I know, in six months, a year, maybe two, she could decide to up and move to another city or another country entirely — leaving me to sell after a short ownership period and exposing myself to real market risk. Keeping the property and becoming a landlord would hold zero appeal for me.
Sounds like the well-meaning, but overzealous parents overpaid. As I recall, they paid over your asking price. If they had been more prudent in what they paid, I think it would have been a good move.
On the other hand, maybe not a good move if they had any idea they would sell in four years.