Your Home, Asset or Liability

[tripods68]

We consider our home the most "valued asset" of all. We don't treat our home "just a place" to "eat or sleep". It goes beyond the Liability or Net Worth. We'd developed many long lasting memories thus far. Like when our born first came home from birth and daughter too. We had our first Family Christmas together or our first Family Thanksgiving, Birthdays, and so on and on. We're very sentimental that way. I can't imagine selling this house. We will live for until we die probably. We definitely want our kids to inherit this house when we're kaput.

[aida2003]

We will live for until we die probably. We definitely want our kids to inherit this house when we're kaput.

...and kids will be happy to sell it...less to save for their own retirement.

It's great that there're some people who LOVE their houses. My mom is that way, but I'm not attached as much.

[Ima saver]

I love my house too. I am lucky that I have always lived in a home built for me, so it is pretty much the perfect house for us!! Also, my husband is a builder, so the labor to build this house was free!! Can't beat free!!

[irmanator]

I think i would consider mine an asset just because it is cheaper than renting. I also don't have to listen to as much of the neighbors noise like when i rented. However when my youngest is out of school i plan on moving further out into the country.

[PrincessPerky]

Not all kids would be happy to sell the house, my husband really wants his parents house...I really want my grandmothers old house...

But unfortunatly niether is anywhere near his job.

Oh and I consider my house an asset..I live in it, having lived in a car, I prefer the house.

[Scanner]

A house is an asset.

Your mortgage and taxes are liabilities.

Your house is too big of an asset for the average person to not consider it in their financial plan.

[Scanner]

TO ADD:

In our total net worth and being 39.5 years old. . .I would say our equity in our house accounts for 60% of net worth.

(I am dismissing furniture and autos in tallying net worth)

How can you not label that an asset and just dismiss it from all of your financial planning?

Take away our house and you've taken away 60% of my wealth.

[maat55]

TO ADD:

In our total net worth and being 39.5 years old. . .I would say our equity in our house accounts for 60% of net worth.

(I am dismissing furniture and autos in tallying net worth)

How can you not label that an asset and just dismiss it from all of your financial planning?

Take away our house and you've taken away 60% of my wealth.

I'm not sure I consider my home 100% an liability, but at best, I still think it is a feel good investment. Like steve said earlier, it's only an asset if you sell it. To our heirs it is an asset. But to use it as an investment for retirement, would seem like a huge mistake.

This brings up why I started this thread. I think it is wiser to buy much less house than you can afford until you have invested well enough to pay cash for your upgrade. People who buy homes stretching their budgets on a 30 year note, are compromising wealth building and their nest egg. In many cases, over buying on house, is only a step up from rent. When I think of renting, I would do it at a much lower monthly cost than I would the purchase of a home.

I bought my home on a 20 year note and right now between interest, insurance and taxes my home costs 768.00 per month, not a very good investment.

[Scanner]

Like steve said earlier, it's only an asset if you sell it.

So's a stock or mutual fund.

At least with a house, it can never be worth $0.

(unless it burns and you don't insure it)

[disneysteve]

Like steve said earlier, it's only an asset if you sell it.

So's a stock or mutual fund.

Scanner, that's true, but the difference in my mind is that if I sell a stock or shares of a mutual fund, I don't have to replace them. I can take the cash and spend it however I choose. If I sell my house, however, I need to replace it to continue to have somewhere to live. Only if I buy a cheaper home would I actually realize any cash from the deal.

[disneysteve]

How can you not label that an asset and just dismiss it from all of your financial planning?

Take away our house and you've taken away 60% of my wealth.

I'm 43 and our home equity is about 35% of our net worth currently (not counting cars, furniture, jewelry, etc. - just financial assets) and that number continues to fall because our investments grow much faster than our home equity grows. By the time I retire, home equity will probably be a little blip on the net worth chart.

Ok, a house is a tangible item that has monetary value, so it is an asset by that definition. However, including it in your financial planning is a whole different issue. How exactly do you count it in your planning, Scanner? I don't see where it would fit. I can't count it as a retirement asset because I can't spend the value of my home to pay my bills when I stop working unless I borrow against it's value, and then it turns from asset to liability.

[Fizgig]

Asset or liability aside, owning this home is excellent for my cash flow.

Total payment - 1100/mo
Rental income - 550
Tax deduction - 300

All in all it costs me $250 a month to live in my beautiful treehouse by the lake, and all the extra cash is stocked away in savings. Rents in my area are around $1000 a month.

The utilities are about $100/mo more than they'd be in an apartment and I do spend about $1000 a year on home improvement and gardening, but still I'm WAY ahead.

I'm very lucky to have the standalone garage apartment. I can easily afford the home without it, but it's just a sweet deal. Even if my home never appreciates and I sell it for what I paid, I'd still pay less in the long run.

[maat55]

Asset or liability aside, owning this home is excellent for my cash flow.

Total payment - 1100/mo
Rental income - 550
Tax deduction - 300

All in all it costs me $250 a month to live in my beautiful treehouse by the lake, and all the extra cash is stocked away in savings. Rents in my area are around $1000 a month.

The utilities are about $100/mo more than they'd be in an apartment and I do spend about $1000 a year on home improvement and gardening, but still I'm WAY ahead.

I'm very lucky to have the standalone garage apartment. I can easily afford the home without it, but it's just a sweet deal. Even if my home never appreciates and I sell it for what I paid, I'd still pay less in the long run.

Your's is truly a liability-asset. Your offsetting the liabilty, good job.

[Scanner]

If I sell my house, however, I need to replace it to continue to have somewhere to live. Only if I buy a cheaper home would I actually realize any cash from the deal.

Or rent. If I sell my house for $350,000, and since it's my primary residence I escape capital gains tax, and now I rent an apt. for $500/month splitting it with a roommate, I have made $349,500 from the sale of said asset.

On the stock though, I absolutely have capital gains tax (15%, I think).

I must confess, I can't recall if the capital gains tax only is exempt if you buy an asset worth more (remain upwardly mobile).

However, including it in your financial planning is a whole different issue. How exactly do you count it in your planning, Scanner? I don't see where it would fit. I can't count it as a retirement asset because I can't spend the value of my home to pay my bills when I stop working unless I borrow against it's value, and then it turns from asset to liability.

I count it as part of my "net worth" goals.

I can also benefit in retirement from my home in 2 different ways:

1. Reverse mortgage.

or

2. (my preference) Sell it to an investor with an agreement to lease back. The asset is then "pre-liquidated" for probate when I pass away.

I then have $350,000 in the bank earning interest and a bonafide agreement to remain in the home and escape taxes, repairs, etc.

Really, I know the spirt of what you are saying, DisneySteve - you and JimOhio are on such a track that your home will probably be somewhere around 5% of your net worth.

For the average American, who has a small pension and a few thousand stashed away, I don't know how you can just pencil off your home on your net worth statement.

[irmanator]

also i was thinking if you have it paid off before retirement it would be a lower cost of living when you are retired, plus if you have a fixed rate mortgage your rate will stay the same. A renter always has the risk of the rent going up.