Net worth and housing

[Tybee]

I have been wondering how net worth and housing costs and real estate fit together for people.
Since we own our current house outright, I just don't count it as part of our net worth. But now we are looking at a mortgage, which would come with a debt, so I would count it in that circumstance, and then subtract the debt.

But what do you all do? Do you apportion a certain percent of your money to be in real estate, and do you include your personal residence in that? I can see a rental property, that makes total sense, but what about your personal residence. I figure you have to live somewhere, and would pay rent without it, but easier to figure without it, unless I have a mortgage.

Do you all have a guideline of no more than x percent of your net worth in your residence, for example?

Or maybe if it's paid off, you just don't consider it?

Am trying to figure out asset allocation on the whole picture, I guess, and not just in the stock/bond portfolio.

Some people take out of their retirement portfolio to purchase with cash. That scares me, as I would lose ability to generate income on that money and to grow it tax deferred.

[Rogar]

Paid off and don't consider it. Reason being that it is unlikely to provide any income from principal or income generation in any foreseeable future.

[SteveinMN]

For us, the real estate just "is". When I bought this house, I spent far less than the lender would give me; I just didn't feel I needed to spend that much money on a house (especially when I didn't know how long I'd have it). My rental property was the same way. And I would not have bought it if I didn't know I'd have a sure rental for at least a few years.

Our financial advisor counts the equity we have in both houses as part of our portfolio, as he counts the guesstimate value of DW's and my pensions. It was nice to hear that number but I'm not sure it means much on a daily basis. From our perspective, the mortgages are just bills to pay until they're gone. We were paying additional against principal for a while but diverted that to investments with a better return.

I'm not looking for additional real estate; DW and I are talking about possibly downsizing in a different city as this one is starting to display a fair amount of stupidity in how they want to spend money. But that would be a wash financially and the equity in the rental could be applied to that to finish it off (or get it close). For whatever reasons, I'm not hung up on paying off the house before retirement. Our income should be enough to cover what's left of the mortgage; we don't have to pay that forever.

[iris lilies]

For us, the real estate just "is". When I bought this house, I spent far less than the lender would give me; I just didn't feel I needed to spend that much money on a house (especially when I didn't know how long I'd have it). My rental property was the same way. And I would not have bought it if I didn't know I'd have a sure rental for at least a few years.

Our financial advisor counts the equity we have in both houses as part of our portfolio, as he counts the guesstimate value of DW's and my pensions. It was nice to hear that number but I'm not sure it means much on a daily basis. From our perspective, the mortgages are just bills to pay until they're gone. We were paying additional against principal for a while but diverted that to investments with a better return.

I'm not looking for additional real estate; DW and I are talking about possibly downsizing in a different city as this one is starting to display a fair amount of stupidity in how they want to spend money. But that would be a wash financially and the equity in the rental could be applied to that to finish it off (or get it close). For whatever reasons, I'm not hung up on paying off the house before retirement. Our income should be enough to cover what's left of the mortgage; we don't have to pay that forever.

Is this just an intellectual exercise as to what you determine as your net worth?


True honest accounting of net worth counts the equity you have in your house. It also counts any mortgage debt against it.


I don’t count pension or Social Security income at all because I calculate our assets as this, on the day we die what is our estate worth? Our pension income and Social Security income die with us, there is no cash value upon death for us.Well, If I die today my pension pays out for five more years to DH. But I don’t know what happens to it if he’s dead as well. I don’t count that because it’s not a ton of money.

[danna]

House paid off and use it for some rental income as well as my residents.

But, I consider my net worth as what I am worth on the day it is all over.
I do question if I should use Insurance payout on death or what it is worth
to me as cash valve? I go back and forth on that one?

[iris lilies]

To speak to the heart of your question, I personally do not like to have a whole lot of money tied up in real estate. I’m relieved that we are now owners of only two houses instead of multiple houses.

I don’t like real estate, I have never made money on real estate —ever. So, I don’t like to have a significant portion of our assets in real property. At this moment, and considering the rapid fall of the stock market in the past few days, even now we have a smaller percentage of assets in real estate then we have had since we were 35 years old.

I have a mental number for our residence, and I do not want to live in a place that has a market value of more than $250,000.

[Tybee]

I never really thought about net worth in terms of "day I die" although it sounds like some do. I think of it in terms of where I am right now in the world.
I don't count social security and don't understand why the financial advisor counts pension.
I guess I'm like Steve, the real estate is where I live but not generating any income.

[Alan]

I don't understand why people don't count their homes value in their net worth calculations. Net worth by definition is the value of assets minus liabilities and has little to do with income outside of the difference between income and expenses which could go in either asset or liability column.

I wouldn't count future earnings as an asset until those earnings were collected any more than I would count future living expenses as a liability before those costs were incurred, with exceptions for mandated future payouts or clawbacks.

[Gardnr]

We own 2 homes free and clear. We consider the cabin cash-it's our self-insurance plan rather than purchasing LTC insurance. We want to live somewhere so our primary home is not an asset.

I started my career long-enough-ago that I have a pension for 20y service. It is unlikely the Nuns will go out of business-but I do not count it in my retirement assets.

An asset calculator published in the late 90s in Money mag, I use to this date. Age * 0.1 * Annual Income. We are currently at 311% of our target.

[iris lilies]

The thread has caused me to think that I need to go find out about my pension information. If it is true that it pays out cash upon the death of both DH and I, I need to know that because our estate executor will have to go after that money and it needs to be reflected in our asset list.

p.s. I just called our pension board and for the next five years there is a cash value to my pension beyond my life and DH’s life. But that disappears in the year 2025. I suppose I will update our asset list to reflect this since it’s well over $100,000.