Just a thought on depreciation

[jjwicklund]

On another thread someone mentioned the fact that RV's are a depreciating asset unlike a house.  Which I don't necessarily agree with as I sold mine after 18 years for less than I purchased it for.  True I was caught in the housing crash but replacement value was 50% more than it sold for. Looking at the bright side I was not underwater so walked away with a few bucks and to soothe myself I just looked at it as being the same as renting with a rent control.  Ok my taxes did increase over the years but I did have the pleasure of decorating to suit and the small vegie garden in the yard.

That brings me to depreciation on RV's we're presently involved in replacing our 13 year old 5th wheel and the value of our trade.  I look at the number of months we've had it and the depreciation works out to $295.00 per month that includes upgrades and replacement for items that failed. So again I just look at it as rent for the enjoyment we've gotten traveling the last 7 1/2 years.  If you consider we volunteer 8 mos of the year our living has been cheap.  There may be a biger cost on higher priced units but for me well worth it as I don't plan on taking anything with me on my final journey. Just another way to look at it.

[Pat & Pete]

It seems you have a pretty healthy train of thought . 

We never really own anything . We use things and pay 'rent' for that use . 

Basically , life is simply a balance of energy .

[sandsys]

Yes. I considered the cost of RVing as rent. I never expected to make money on a rig. We paid a lot less per month RVing than we are paying now in a retirement community. But, the benefits here make it worth it to us. Attitude can change everything.

Linda Sand

[ToddF]

There isn't anything inherently wrong with purchasing an asset that depreciates in value over time. Factories buy equipment and produce goods. RVers get housing and leisure in exchange for their $.

But a S +B house is the primary vehicle (pun intended) through which Americans accumulate wealth. The mortgage payment is a forced way to save (build wealth). And many screw this up by refinancing or using their home as an ATM. (2008)

Nothing wrong with RVing...but you need assets and income since the RV represents neither.

Some folks make $ on their homes...many don't. My grandparents bought a home on Long Island in the 30's for $5,000. They never made any substantive improvements to it and sold it for $300,000+ in 2005. Something to think about.

 

[rideandfly]

We can sell our 2015 Oliver Elite II TT for what we paid for it. We purchased it used during 2016 for a little less than what it sold for new during 2015.

[sushidog]

Houses depreciate too. It's the land that they are on that appreciates - if you are lucky. 

Plus they need repairs, yard maintenance, homeowner's asc. fees, property taxes, homeowner's insurance, flood insurance, etc. 

When I had my S&B the property tax and Homeowner's insurance alone amounted to 2% of the value of the home. That's more than monthly campsite fees - plus you often get free WiFi, cable, a swimming pool, garbage collection, sewer and often a gym or lending library included in the low monthly fee. That's a built in depreciation that one must write a check for every year, not wait till you sell it to pay. In 50 yrs you just bought a new home! Skip a year and the state will seize it, throw you out on the street and sell it. 

Then there are other incidental fees associated with home ownership that do not apply to living in an RV. Trash pick-up is one - I just wrote the check today. Then there's the water and sewer bill. I don't know many RVs that use $300 worth of electricity and gas a month, but that's what it cost me to cool my home in the summer, not to mention $75 every 2 weeks to cut my grass - more if you have a big yard. 

House repairs are higher too. Compare the cost of replacing an RV roof or AC vs a roof or central air on a S&B. An RV may need more frequent maintenance, but house maintenance is often 10 times the cost. I had a pipe burst under my S&B. Have you ever priced hydro-tunneling? OMG! If a pipe starts leaking in your RV not only is it dirt cheap, but you can often fix it yourself. Add all these up and the RV's depreciation is relatively cheap in comparison, especially if one buys a slightly used RV when most of the depreciation is already over (and all the bugs worked out too.)

People often complain about the gas mileage of an RV, but what would it cost to pull your house down the road to warmer weather in the winter and cooler climes in the summer? See my point? How can you put a value on having the entire country as your back yard? And you never need to cut one blade of grass! 

Chip

[eddie1261]

Spot on, sushi. My taxes have gone up every year since I bought this house, for schools I have no connection to whatsoever. My kids are 40-ish and don;t even live in this state. I pay a guy to mow my grass because my knees don't allow me to do it. I pay the same guy to clear the snow in the winter for the same reason. There is painting, roofing, the fence I had to put in for $2250 to contain the dog, and $600 for plumbing this year. And the $6250 I paid for 10 windows 3 years ago that will NOT raise the value of the house by $6250. I still have to pay a guy to put in a laminate floor in the living room to match the kitchen, and then do something with my bathroom from hell before I can list the house. And in this neighborhood, if I break even I will be ecstatic. I live in a very safe pocket OF the neighborhood, but that doesn't seem to matter. So the concern that an RV is, as one person told me, a "rapidly depreciating asset", it can;t be any worse than a 1960s house in a bad neighborhood that needs a new garage. 

In my case, then RV will become my house until I die in it once I leave the home behind, so it doesn't matter. As long as it gets me 60 miles a day and doesn't need a transmission every week, I am happy.

[Ray,IN]

jj that is a logical point of view.

[Kirk W]

On 9/1/2017 at 10:37 PM, eddie1261 said:

In my case, then RV will become my house until I die in it once I leave the home behind, so it doesn't matter.

RV living can be dicey when infirmity comes if you happen to need a wheelchair or even a walker. Very few of them are designed to be accessible to such appliances. While I don't necessarily advocate the purchase of a stick house again, I do strongly recommend having some general provisions for an exit plan from RV living. I can tell you from our experience that the need to find alternative housing can arrive quite unexpectedly. 

[ToddF]

Rent is very high in most parts of the country. Better have money in the bank or a nice income.

[richfaa]

Our S&B purchased in1989 has tripled in Value best investment we ever made not so with our two 5th wheels.

[noteven]

So, in general terms, is a S&B house worth more when it is 40yrs old than the day it was finished building? 

Foundation cracks, roofing needs replaced,  flooring worn out, plumbing leaks, heating system limping, a/c n/a, garage sill rotting, ...

Or does our money mostly buy less? 

[ToddF]

In general, ALL RVs will decline in value to zero over time (20 years, maybe small "salvage value" at the end.)

In general, a well maintained S+B home in a good location will hold it's value and maybe appreciate at or above the CPI (inflation rate of increase). 

Apples are usually RED and oranges are usually orange.

 

[remoandiris]

10 hours ago, noteven said:

So, in general terms, is a S&B house worth more when it is 40yrs old than the day it was finished building? 

Yes.

 

 

 

But, in those 40 yrs, the value of a dollar also fluctuates.  Prices on virtually everything goes up.  You can't buy a 5 cent newspaper anymore or a nickel cigar.  So while that house may double or triple in value over time, to get the REAL increase in value, you MUST compare the dollar value from the day the house was purchased to the day the house was sold.  That will give the REAL increase or decrease in value.  Google "the time value of money" to get an idea of how a dollar is not worth a dollar over time.  And as said above, comparing an RV to an S&B is comparing apples and oranges.

[Pat & Pete]

10 hours ago, noteven said:

So, in general terms, is a S&B house worth more when it is 40yrs old than the day it was finished building? 

Foundation cracks, roofing needs replaced,  flooring worn out, plumbing leaks, heating system limping, a/c n/a, garage sill rotting, ...

Or does our money mostly buy less? 

BINGO !!! 

$10 in 1977 equals $41.48 in 2017.

https://www.saving.org/inflation/inflation.php?amount=10&year=1977

[Kirk W]

1 hour ago, remoandiris said:

 So while that house may double or triple in value over time, to get the REAL increase in value, you MUST compare the dollar value from the day the house was purchased to the day the house was sold.  That will give the REAL increase or decrease in value.

This true but even at the inflated impact of prices, most real property does increase in value over time, mostly because our population keeps increasing while no new land appears. The result is an increasing demand for land and that means higher prices even after adjustment for inflation. Of course, even this is never 100% true as other things can cause real estate to fall, and particularly so for houses. The town that I went to school in now has about 10% of the houses that were occupied when I was in school, sitting empty, for sale with no buyers. The reason is that farms have continued to get larger, meaning fewer farmers, roads have improved so shoppers go to larger towns that are farther from home and most businesses in that town have closed. The schools are gone and the only businesses remaining are the bank, a grain elevator, a bulk fuel delivery station, and a mechanic who repairs automobiles and farm equipment. As a result, the population has fallen and increased in average age. You could probably buy a house in Dwight, KS for far less than it would cost to build one like it. 

[richfaa]

12 hours ago, noteven said:

So, in general terms, is a S&B house worth more when it is 40yrs old than the day it was finished building? 

Foundation cracks, roofing needs replaced,  flooring worn out, plumbing leaks, heating system limping, a/c n/a, garage sill rotting, ...

Or does our money mostly buy less? 

Not if you do proper maint. We have replaced the roof once in the 28 years we have been here most of the carpeting once. The heating cooling system is 25 years old and in good condition it is serviced and inspected every year. This S&B sold for 53,500 1989 $$ which is 105,613 in  2017 $$. The last S&B like ours on this street sold for 210,00 2017 $$$. We spend 2017 $$$. We converted from Electric to gas  heat in 1992.

[Kirk W]

6 minutes ago, richfaa said:

Not if you do proper maint. We have replaced the roof once in the 28 years we have been here most of the carpeting once. The heating cooling system is 25 years old and in good condition it is serviced and inspected every year.

1

In addition, when I look at home values I also compare the cost of that home to what my alternative would have cost since most of us would be paying rent if we did not buy a home. The value of that house is pretty sure to be more than the value of the rent receipts you would otherwise have, even after considering the cost of owning and maintaining it. 

[noteven]

I am far from an investment / future value genius... 

So if a young family starting out today rented adequate shelter where they work / want to live and invested the "buy a place" down payment plus the monthly extra money it might take to "own" a home (payments, taxes, maintenance, suprises minus the rent) 

I wonder what that would look like after 25 years?

A young couple I met in Alberta said by renting they have 1. kept their accumulating of stuff to a minimum 2. been able to move easily to take advantage of work opportunities 3. save up over $200K in 8 years while friends have bought suburban homes they are under water $100K in right now in the last few years, can't move to work, can't sell readily, need to own 2 vehicles to commute, etc. 

Note - in Canada we do not write off mortgage interest, but capital gains on the sale of your principle residence are not taxable. 

This couple said what would be ideal for them is a true all season capable mobile dwelling they could move with them for vacation, job changes, etc. Low energy demand, well built, not covered with the garish swoops and swirls...  but top to bottom the residential dwelling business / municiple taxation system is not in favour... 

edit - a course I contributed to wandering off the original topic again - which is "depreciation..." oops 

I've avoided a large chunk of depreciation by buying decent oem quality used rv's that have been looked after a bit - Kustom Koach, Bigfoot, Carriage, Kustom Koach Roughneck (now built by General Coach), Snowbird/Snow River .... 4 out of 5 Canadian privately owned companies, 1 US privately owned company...  most gone bust once or twice competing with shareholder companies where your call is important to us.... 

Looking at the fleet inventory right now - all bought used: 1 Carriage Toyhauler, 1 Roughneck winter capable trailer, 1 Snowbird truck camper, 1 Dodge 3500 diesel 4x4 4 door SRW equipped to tow/haul, 1 Kenworth dually RV puller - adding up what was paid for this fleet when bought would not buy a new 350/3500 diesel dually with 1  truck camper same spec as I have. 

But you have to tinker and fix and maintain from time to time... 

 

 

[remoandiris]

On 9/15/2017 at 0:14 PM, noteven said:

 

So if a young family starting out today rented adequate shelter where they work / want to live and invested the "buy a place" down payment plus the monthly extra money it might take to "own" a home (payments, taxes, maintenance, suprises minus the rent) 

I wonder what that would look like after 25 years?

A young couple I met in Alberta said by renting they have 1. kept their accumulating of stuff to a minimum 2. been able to move easily to take advantage of work opportunities 3. save up over $200K in 8 years while friends have bought suburban homes they are under water $100K in right now in the last few years, can't move to work, can't sell readily, need to own 2 vehicles to commute, etc. 

 

It all depends on what you want.  It is too easy to compare apples and oranges.  Just like it is too easy to over-extend yourself with credit and too easy to get a 30 yr mortgage instead of a 15 yr mortgage.  It is hard to set goals, hard to save that extra money, and hard to break out of the pack mentality and go your own way.

There are plenty of people who pay rent on houses they could own for several hundred dollars a month less, even on a 15 yr mortgage.  I think young people are less interested in putting down roots.  They change jobs more often, sometimes by need vs desire.  Same with moving from town to town.

[Ray,IN]

On 9/13/2017 at 8:10 AM, Kirk Wood said:

RV living can be dicey when infirmity comes if you happen to need a wheelchair or even a walker. Very few of them are designed to be accessible to such appliances. While I don't necessarily advocate the purchase of a stick house again, I do strongly recommend having some general provisions for an exit plan from RV living. I can tell you from our experience that the need to find alternative housing can arrive quite unexpectedly. 

I  agree! On a different RVing forum someone posted about their friends losing their 5er they left in the FL keys when they evacuated; it was destroyed. Now they are inquiring about FEMA replacing their trailer via a grant or something, because they do not have the money(insurance?) to replace their 5er. That's about as little of an exit plan as one can  ever have.

[Kirk W]

8 hours ago, Ray,IN said:

Now they are inquiring about FEMA replacing their trailer via a grant or something, because they do not have the money(insurance?) to replace their 5er.

It would be interesting to hear "the rest of the story" when that winds up. As expensive as it can be, we always kept "full replacement" coverage on ours as long as it was our only home. 

[Pat & Pete]

11 hours ago, Ray,IN said:

I  agree! On a different RVing forum someone posted about their friends losing their 5er they left in the FL keys when they evacuated; it was destroyed. Now they are inquiring about FEMA replacing their trailer via a grant or something, because they do not have the money(insurance?) to replace their 5er. That's about as little of an exit plan as one can  ever have.

Living beyond means and everyone else pays for it .

[GeorgiaHybrid]

I guess I take a different look at our RV's. They are a hobby to us and a source of fun and adventure. We didn't buy them to make money or squirrel away some cash into an "asset". They are a hobby just like fishing, boating, shooting, golf, softball, tennis, car racing or any other number of "hobbies".

They are meant to enjoy the fruits of your labor, not become a "depreciating asset" or an exit plan from your S&B until the retirement home looms in your future. They are there to enjoy, travel, see places and things and meet new people. To start new friendships, visit with family and old friends and ENJOY your life.

Use the budget you have and live with it. At my age, it is a little to late to worry if I have enough or not but I will enjoy the time I have left and if the money runs out before I run down, it will be time to settle down in one place. That's life. Enjoy it while you can and don't sweat the small stuff (like  how much your RV will be worth when you are 90 years old).

[GlennWest]

Ours is our home. We travel to get income. My job is where ever work is. I also chase the higher paying jobs. When I retire we will likely travel for fun then. Not saying we don't enjoy our lifestyle though. Yes, it will loose valve but we don't have a lot invested in it. Giving me the ability to choose where I work is a big plus. The alternative is no home at all staying in hotels.