Denise Richards, of famed divorced from Charlie Sheen, has just sold her house in the LA area of Hidden Hills, CA for a reported $4.75M.
This is one that she was reported to have rented to Angelina Jolie for a brief period for a staggering $30,000 per month - following her separation from Brad Pitt.
Was $30K/month excessive rent?
Consider this: Denise Richards bought the house in 2007 for $4.4M. So, despite previous attempts to unload it along the way, selling after 11 years for $4.75M….she made (just) $350,000 on the house. That is about 0.7% per year.
Note to self (and Denise Richards): not everyone makes money on houses, not even in California. In fact, you might do better investing T-Bills.
However, if Denise had a mortgage, which Wall Street Journal reports that many super rich do, she might have only put up 10% or just $440,000. So, on the down payment (and outside of rent she collected along the way), she might have made about 80% on her housing “investment”. Not bad!
But, that’s not the whole story. As they say in the tabloids: “Wait…there’s more!”
While holding the house, Denise Richards also surely paid property tax and maintenance, conservatively estimated at 2% and 1%, respectively.
That is: another $88,000 +$44,000 or $132,000 per year spent holding a house.
Put mortgage interest on top, at perhaps another 3%, and now you’re at $264,000 total per year; or, about $22,000 per month to hold the house.
Across 11 years….that’s $2,904,000 to hold the house…or just $2,554,000 (after the modest gain of $350,000).
And people say: “renting is just throwing away money.” Owned or Rented (houses are EXPENSIVE).
In other words, it is very lucky that Denise Richards is wealthy (and got a Miss Ex-Pitt as a renter along the way) because it costs a pretty penny to hold that house.
In that perspective and where ownership rates in Hidden Hills are over 90%, it seems Miss ex-Pitt was doing pretty well paying $30,000/month in rent. She just moved-on from the house the way she did Brad Pitt.
I don’t have anything against Denise Richards. She is lovely. This is just a simple example, based on estimated data, of the fact that houses are NOT a good investment.
In fact, houses can be very, very expensive to hold. You’re often better off to just: Rent Your Way To Freedom and show a little more love to your landlord.
Although this story is an extreme example, rest assured, the same thing happens with $440,000 houses too. Same thing, different levels.
You can be like Miss Denise Richards and choose to own it. Or, just rent your way through life.