View Full Version : percentage of net worth in housing
Revisiting this topic for input. When I do my net worth, I do not count equity in my house and I do not count mortgage debt. I know this is traditionally how net worth is calculated, to include those, but I got out of this habit when for years we had no mortgage. Anyway, I wondered how much of one's net worth is in housing. Not rental real estate, one's own housing. So in my case, since I owe money on the only property I have, I would consider that I have no part of my net worth in housing.
If I did it the other way, I guess we would have about eight percent of our net worth in housing. I want to go back to owning without a mortgage. What percentage of one's net worth would one feel comfortable using to buy real estate. I think of IL's friend who bought in New Hampshire out of her IRA, for example, which I thought was scary risky. Now it's probably turned out really well although you can't eat equity in your house.
maybe this question is too vague to sensibly answer. . .
In my own financial model, I don't count the value of the house I live in as "net worth", even though I own it free-and-clear. Since I live in it, and to get my hands on the "worth", I'd need to sell it, pay taxes on the capital gains and commissions and taxes on the sale, and then have to find somewhere else to live. One of my planning goals is to avoid this :-)
I don't reckon in the values of my automobiles/boats/bicycles/shoes either.
I only count things that generate income I can use to live off of. "Net investable assets".
iris lilies
12-3-23, 2:54pm
So many Americans have so much of their assets tied up in their dwelling, it ain’t good. While I don’t consider the residential real estate we have owned to be investments (and our balance sheet on the 3 tiny houses we owned will confirm that! Losing money on each of our hobby houses is just what we do) I do of course count its value when we total up assets each year.
It is tricky right now to put a value on the house we now live in because it isn’t finished. I figure it would cost $20,000 to hire out the remaining work.
Anyway, very roughly, our two dwellings probably constitute 12% of our net worth.
I’m not unhappy with that, but that percentage has been lower for us in recent past. It is not my goal to make it a smaller number. I am a point in my life where I’m no longer accumulating money, I’m spending it.
Thank you, I so agree with Bae that it doesn't make sense to include the house for that reason, or anything else that cannot generate income. Like the phrase net investable assets.
IL, I agree that having assets tied up in one's dwelling does not really make sense. Although I guess it might from standpoint of spend down of assets if one is in a nursing home, if one is somewhere like Florida where they do not take your house.
If I had equity in my house, I would not be comfortable borrowing on it, so I would not really count it.
But if you started over and downsized, is there anyone who has thought about how much of their net worth they would be comfortable having in their house? Again, probably a vague question. And of course it depends on how much you have altogether, as well.
Houses up here have quadrupled in price since we started looking back eight years ago. This area feels too expensive for a long term gameplan.
iris lilies
12-3-23, 3:54pm
If I was downsizing, and I didn’t think I had “enough “in investable assets, sure I would be setting a modest budget for any house I buy.
But that could be a scenario for keeping a mortgage. Even though mortgage rates have gone up, they still aren’t so bad, right? I don’t know. it’s been decades since I had a mortgage and that was at something like 11 1/2%.
You are really trying to set a budget for a house here, right? I don’t know that percentage of assets is a budget formula that makes sense in every scenario, especially in high cost of living scenarios.
I guess that is where I am heading? Like if we sold this and started over, here or elsewhere, what percentage would feel comfortable to put into a house, buying the house with cash?
We were happier not having a mortgage.
frugal-one
12-3-23, 9:43pm
Thank you, I so agree with Bae that it doesn't make sense to include the house for that reason, or anything else that cannot generate income. Like the phrase net investable assets.
IL, I agree that having assets tied up in one's dwelling does not really make sense. Although I guess it might from standpoint of spend down of assets if one is in a nursing home, if one is somewhere like Florida where they do not take your house.
If I had equity in my house, I would not be comfortable borrowing on it, so I would not really count it.
But if you started over and downsized, is there anyone who has thought about how much of their net worth they would be comfortable having in their house? Again, probably a vague question. And of course it depends on how much you have altogether, as well.
Houses up here have quadrupled in price since we started looking back eight years ago. This area feels too expensive for a long term gameplan.
We decided to insure our place for very little. If the place blows away in a storm so be it. That being said, I LOVE our place. It would be hard to replace. We have exactly what we want… albeit it is not new but fixed to the way we want it.
ToomuchStuff
12-3-23, 11:08pm
Housing net worth, is something that needs to be figured for estate purposes.
catherine
12-3-23, 11:18pm
I always consider housing assets/liabilities in determining my net worth. I have read the rationale those of you who don't, but I don't understand why your house would irrelevant for figuring you net worth. If I had to, I could sell my house and bank the proceeds. Capital gains would not apply to me, so I would not be worried about having to deduct that.
In terms of how much of your net worth should be tied up in your house, I think that's a personal decision. In my case, it's about 50/50, but I don't have a big "security gland" as Dave Ramsey would say.
iris lilies
12-3-23, 11:59pm
Housing net worth, is something that needs to be figured for estate purposes.
Yes, once a year, we tally up our net worth to describe our estate. It’s a consistent number that we’ve tallied every year for 30+ years so it is an apples to apples comparison each year.
One can ascribe whatever meaning to it that one wishes to, with or without the influence of a dwelling.
I think of it as “on the day we die this is what our estate is worth, and this is what heirs need to deal with. “
happystuff
12-4-23, 12:02am
I am hopeful that when we downsize the sale of our current home will cover the cost of the smaller abode - meaning no mortgage. I'm even thinking mobile home so if we aren't happy where we are, we can just go somewhere else with our home in tow.
rosarugosa
12-4-23, 7:38am
I believe one's real estate is part of net worth by definition, although you can certainly leave it out of other calculations if you choose, e.g. IL's "investable assets." Our home is a large % of our net worth, not due to some predetermined allocation of resources, but because real estate values have appreciated so much since we bought our house in 1985. Happily, we do not have a mortgage at this point in our lives.
frugal-one
12-4-23, 8:45am
I am hopeful that when we downsize the sale of our current home will cover the cost of the smaller abode - meaning no mortgage. I'm even thinking mobile home so if we aren't happy where we are, we can just go somewhere else with our home in tow.
Mobile homes where I am often don’t get advertised. They are quickly purchased via word of mouth. I think they would be cost prohibitive to move.
happystuff
12-4-23, 10:55am
Mobile homes where I am often don’t get advertised. They are quickly purchased via word of mouth. I think they would be cost prohibitive to move.
I have seen ads here and there in my area, but you are right - not often. Past investigation put moving one in the $5000 range, but not sure any more as that was a while ago. I would love to find a nice little piece of land to put one on. Or maybe a tiny mobile home or two. I'm still in the "dreaming" phase. ;)
dado potato
12-11-23, 9:00am
is there anyone who has thought about how much of their net worth they would be comfortable having in their house? Again, probably a vague question. And of course it depends on how much you have altogether, as well.
Houses up here have quadrupled in price since we started looking back eight years ago.
My rule of thumb is to plan on 20% of total assets in owner-occupied real estate. The value I use to track the house is Zillow's "Zestimate", with the understanding that it is just a product of Zillow's algorithm... not what I would be able to sell it for on a given day. Increases or decreases in the value of the house do not affect "investable assets" (what I call "capital"). If there were a mortgage on the house, I would deduct the balance owed from the "Zestimate" value in my calculations.
dado potato
12-11-23, 9:32am
I am hopeful that when we downsize the sale of our current home will cover the cost of the smaller abode - meaning no mortgage. I'm even thinking mobile home so if we aren't happy where we are, we can just go somewhere else with our home in tow.
When I think about downsizing, I would view it a transition to an improved quality of life... great pleasures during our riper years. My dear wife and I have done some scouting. She tends to be a rugged individualist, while I can appreciate the engagement and mutual aid involved in co-housing or the odd non-profit condo development, such as Mountain Meadow Condos, located in Ashland OR. The price would be quite steep to buy or rent in the sort of Shangri La that would lure me from our home in the Northern Highlands of Wisconsin.
Dado, I like the 20% figure; I looked at it with my numbers and that is where I have been looking for the new house.
sweetana3
12-11-23, 10:38am
Just calculated ours and fully paid for housing is about 8% give or take of our total net worth. Not sure it will ever really change unless we decide to buy into an extremely fancy CCRC or some such. We both like smaller properties and am constantly downsizing. Walkability is what will keep us where we are and our next property will not have stairs.
dado potato
12-11-23, 8:04pm
Just calculated ours and fully paid for housing is about 8% give or take of our total net worth. Not sure it will ever really change unless we decide to buy into an extremely fancy CCRC or some such. We both like smaller properties and am constantly downsizing. Walkability is what will keep us where we are and our next property will not have stairs.
I don't know what CCRC stands for... Certified Clinical Research Coordinator?
Walkability of a specific location means a lot. I look at maps to/from specific properties. I want to know the walking distance to the food coop, to trails with foliage and birds, to a rose garden or a Japanese garden, to a senior center with congregate dining, to farmers markets, pubs, and parks. (Where the walkability is good, homeless camps are often a noticeable feature.)
sweetana3
12-12-23, 6:14am
Continuing Care Retirement Community. We have at least two nice big ones where we live and a good one way up in Goshen IN. But most residents appear to be those with either some health issues or over 90 so we dont fit in yet. Cottages or apartments with all needed amenities provided within a short walk, like indoor swimming, dining, crafts, social activities, transportation, etc.
Oh, and I like more urban and close living. Do not mind living around people (if the property is appropriately sound proofed.) No country or suburban living for us.
iris lilies
12-12-23, 11:46am
When I think about downsizing, I would view it a transition to an improved quality of life... great pleasures during our riper years. My dear wife and I have done some scouting. She tends to be a rugged individualist, while I can appreciate the engagement and mutual aid involved in co-housing or the odd non-profit condo development, such as Mountain Meadow Condos, located in Ashland OR. The price would be quite steep to buy or rent in the sort of Shangri La that would lure me from our home in the Northern Highlands of Wisconsin.
That’s probably where my aunt in Ashland, OR lived. She died a few years ago. I say “probably” because she moved there with several of her friends. They moved from Sea Ranch, CA, so they have that sort of Rich Hippie Expectation for housing.
Interesting discussion. We own our home free and clear. After some calculating, it looks like our home represents about 93.5% of our net worth.
We have modest savings and 4 old vehicles. We don't have any retirement accounts, nor do we want any.
We live simply. Our only pressing concern is no health insurance. We are currently healthy for our age (57 and 52). We will be looking into a catastrophic health plan soon, as this just recently came to our attention that such a thing exists.
catherine
12-18-23, 8:35am
Interesting discussion. We own our home free and clear. After some calculating, it looks like our home represents about 93.5% of our net worth.
We have modest savings and 4 old vehicles. We don't have any retirement accounts, nor do we want any.
We live simply. Our only pressing concern is no health insurance. We are currently healthy for our age (57 and 52). We will be looking into a catastrophic health plan soon, as this just recently came to our attention that such a thing exists.
You sound like a kindred spirit in some ways... can you tell me why you don't want any retirement accounts? Is it a philosophy you can share?
Yes catherine, to answer your question, why we don't believe in retirement accounts. My wife and I live our lives believing teotwawki is inevitably quickly approaching. To invest for retirement would be in conflict with this position. I think I'll leave it at that.
iris lilies
12-31-23, 7:16pm
We just completed our annual asset review.
Our residences, 2 of them, make up ….% net worth. I was way underestimating that number when I replied to this thread earlier.
I do not expect that percentage to change much in the next several years. While our assets are growing at a healthy rate, I want to hit charitable donations harder, so …we shall see what happens to those numbers.
Edited to say: the number above was incorrect, and I’m an idiot. I was including the farm in this this calculation. The one, true, and final number is this: our residences make up 9% of our net worth.
9%
We just completed our annual asset review.
Our residences, 2 of them, make up 22% of our net worth. I was way underestimating that number when I replied to this thread earlier.
I do not expect that percentage to change much in the next several years. While our assets are growing at a healthy rate, I want to hit charitable donations harder, so …we shall see what happens to those numbers.
Thank you, I just redid the calculations on our current situation and we are at around 29%. I have no idea why I write 8 percent, what I meant--made no sense when I looked at the numbers again.
iris lilies
1-1-24, 1:12pm
See adjustment above. I foolishly included farmland in that first number.
I see. If I include inheritance, my number will change but I am including that in my figures until the estate is settled.
littlebittybobby
10-4-24, 2:43pm
Okay---I really don't have any money& never did have a pot to p x x in 'er a winda ta pitch it out of, as they slyly say up in IWAH, the Meat State. Unless, of course you count my ramshackle hillbilly shack with an old, non-runninng Packard out back with a rat living in it. Do lottery tickicks & aluminum empties count, too? So yeah---I'll hafta see a CPA. Yup.
littlebittybobby
10-5-24, 1:40pm
okay----I just sittin' here, wondering: If I was ta put in a cee-ment pond in back o' my hillbilly shackk, would it increase my "nett worth" or whatever? Just curious.
okay----I just sittin' here, wondering: If I was ta put in a cee-ment pond in back o' my hillbilly shackk, would it increase my "nett worth" or whatever? Just curious.
Nope! Net worth is the difference between assets and liabilities, if you pay cash you're trading one asset for another and if you finance, you're increasing liabilities while also increasing assets, although the asset increase probably will not cancel out the liability increase. The best you can hope for is a draw.
Hope that helped you some.
littlebittybobby
10-5-24, 3:11pm
Nope! Net worth is the difference between assets and liabilities, if you pay cash you're trading one asset for another and if you finance, you're increasing liabilities while also increasing assets, although the asset increase probably will not cancel out the liability increase. The best you can hope for is a draw.
Hope that helped you some. yeah, but what i was thinkin' was, was ta rent out a backhoe, dig the hole, and them use that pond cee-ment ta make 'er hold water, and just let the garden hose & water from the gutters replenish it. Hopin' the place might gain Val-U, when I go ta flip it. See? Meanwhile, Graaaa--nd kidz always enjoy playin' in water holes.
Depends on your local market.
In some areas, a swimming pool is viewed as a liability, or undesireable. And it may reduce the number of potential buyers for your property, which, depending on the local market, may drive your price down a bit.
In other areas, pools are a must-have.
iris lilies
10-5-24, 7:35pm
Recently I saw a property I really liked though I’m not shopping for another property, but if shopping I would consider it. But it had an inground pool that took up most of the backyard.
so I wonder, how hard are these to fill-in? Do you just push lots of dirt into the hole and live with it that way?
littlebittybobby
10-5-24, 8:26pm
No, faux---you gotts dig out the old pool, first. 'Cause if you just fill it in, you'll have a marsh, because it will still retain water. See? Didn't they teach you that in lirrrry school? Thankk mee.
iris lilies
10-5-24, 8:54pm
No, faux---you gotts dig out the old pool, first. 'Cause if you just fill it in, you'll have a marsh, because it will still retain water. See? Didn't they teach you that in lirrrry school? Thankk mee.
Oh yeah, OK. So how much would that cost?
littlebittybobby
10-6-24, 4:53pm
Oh yeah, OK. So how much would that cost? okay---tell you what---go ahead and leve the pool where it is. Then, put a concrete bock foundation around the perimeter of the old pool, and then put a room sitting on top of that. Then, you've got more space upstairs/downstairs to use, year round. See? Or else, make a greenhouse out of the old pool. Be a creative engineer. Hope that helps you some.
No, faux---you gotts dig out the old pool, first. 'Cause if you just fill it in, you'll have a marsh, because it will still retain water. See? Didn't they teach you that in lirrrry school? Thankk mee.
You can't just pull the plug before you put the dirt in? Wouldn't that be good enough to let the water drain out? I've never owned a pool and probably nerver will so I'll have to trust other people on topics like this.
littlebittybobby
10-8-24, 5:41pm
You can't just pull the plug before you put the dirt in? Wouldn't that be good enough to let the water drain out? I've never owned a pool and probably nerver will so I'll have to trust other people on topics like this. No.
rosarugosa
10-9-24, 6:05am
JP: It can be difficult to grow a lot of things in clay soil, because it causes poor drainage, so I think it's safe to assume that a built-in swimming pool is going to have exponentially worse drainage. There might be potential for some sort of water garden or something.
littlebittybobby
10-13-24, 1:50pm
okay---RR is correct. Not only that---many places you'd need a demolition permit to remove and fill in a swimming pool in the prescribed manner. This was not a pool, but a 50-year old brick ranch near me was vacant, and then occupied by squatters. Well, the squatter was a cross-dresser who was living in the basement amid much cardboard and debis and lighting it with candles, which caused a fire that burned through the roof of the house, destroying it and killing the squatter. Well, it only took a day or two to remove the house, but the rest of the week to remove the concrete foundation and basement. They did not just fill 'er in with dirt and call it good.
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