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    #31
    Originally posted by rennigade View Post

    Our home also represents a small portion of our money. Im guessing thats why people like us couldnt care less what our home is worth. We're not planning on selling anytime soon, and it represents a small fraction of our portfolio. Its always the ones who are house poor who include it in their nw, or typically I should say. There are exceptions to the rule.

    Now, if I owned a house and used it as a rental, or if I flipped homes. Yes, I would include it would be generating income for us.
    Definitely not house poor. Granted my house is currently being rented out, so I guess I'd fall into the exception of the rule.

    However, the more we discuss this thread about whether to include real estate in NW (outside of rental property), I think it makes more sense to factor even if it's just a primary residence, especially after Like2Plan's question about listing pretax assets. I'm assuming most of us on this forum have no interest in an early withdrawal for investments before age 59.5. So we're going to assume those funds are basically untouchable, but yet we count them for net worth. I can't speak for everyone else, and myself a home owner for 12 years (where does the time go?), I don't see this as my forever home. As with life being unpredictable, the odds are more likely I'd probably sell my home (hopefully for profit) before accessing retirement funds.

    So while it's not easy to simply sell a home for quick gains, I think it's realistic to at least include for assets depending on age and if you believe you'll plan to move soon vs keep forever.
    "I'd buy that for a dollar!"

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      #32
      Originally posted by cypher1 View Post

      Definitely not house poor. Granted my house is currently being rented out, so I guess I'd fall into the exception of the rule.
      Definitely. If it's a rental, it needs to be counted. It's an income-producing asset.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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        #33
        Originally posted by cypher1 View Post

        Definitely not house poor. Granted my house is currently being rented out, so I guess I'd fall into the exception of the rule.

        However, the more we discuss this thread about whether to include real estate in NW (outside of rental property), I think it makes more sense to factor even if it's just a primary residence, especially after Like2Plan's question about listing pretax assets. I'm assuming most of us on this forum have no interest in an early withdrawal for investments before age 59.5. So we're going to assume those funds are basically untouchable, but yet we count them for net worth. I can't speak for everyone else, and myself a home owner for 12 years (where does the time go?), I don't see this as my forever home. As with life being unpredictable, the odds are more likely I'd probably sell my home (hopefully for profit) before accessing retirement funds.

        So while it's not easy to simply sell a home for quick gains, I think it's realistic to at least include for assets depending on age and if you believe you'll plan to move soon vs keep forever.
        I'll speak as a parent. I do not need the house we have or location once the kids are grown. Especially if we buy a bigger more expensive house. I will downsize. Now our house is probably okay for the two of us, but if we upsize say to 3000+ sq ft from our 2000 sq ft then for sure I'm downsizing when the kids go away.
        LivingAlmostLarge Blog

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          #34
          Don't confuse your "retirement nest egg" with your actual "net worth", as some do.
          When you prepare a real personal financial statement, you list everything you own of value -vs- any debts and the balance is your net worth. Net worth is much like cashing in all of your chips, how much would be left for heirs if you got hit by a bus or dropped dead today.

          So your house and / or house equity would most certainly be part of your net worth.
          Zillow is a fine source to use, but as suggested by others it's probably wise to err towards conservative values and to always use the same methodology each time you update your financial statement.

          Just looked at my financial statement. Some of the things it includes are:
          Savings accounts
          CD's
          Stocks
          Current value of IRA
          Real estate
          Vehicles
          Home furnishings / appliances
          Tools & heavy equipment
          Boats, atv's & toys

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            #35
            I guess I just see it as silly to discount out of hand an asset that is unavoidably a large (often largest) single component of one's total net worth. The term "net worth" is quite explicitly & easily defined: total assets minus total liabilities. Sure, a complete inventory of the full contents of your home are a part of those assets. But most all of those are low-value depreciating assets. <$50k easily (typically half that), in total.... So why bother, unless there's a specific high-value item that actually does appreciate? Maybe one could consider a car, if it's worth $20k or $50k or whatever... But again, it's depreciating, while a home will slowly (or sometimes rapidly) appreciate. Does my primary home generate income? No, but it does go up on value over time. Is it the first thing on my list of stuff to sell if I need cash? No, but it's definitely on there. Maybe I just move around enough (every few years) that I see a home as relatively transitory. Houses come, houses go, but the value in them stays with me.
            "Praestantia per minutus" ... "Acta non verba"

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              #36
              If I owned a home, I'd definitely include it in my net worth, though I would probably have a different subtotal for home value than I do for actual cash investments. I also have a subtotal in our net worth for unrealized stock options and then I know what our net worth plus unvested options would be at any given point. I enjoy tracking all the ups and downs of all this type of stuff, so if I owned, no way I wouldn't include it in some way (especially if I owed money on it, important to track liabilities against assets).

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                #37
                Originally posted by rennigade View Post
                I always feel that people who include their home in their NW are doing so to pad their numbers and make their overall situation look better than it really is.
                The only time I added in my house is if I also subtracted the remaining mortgage. However, I generally do not count my house. I mean you need a place to live regardless. Our home is paid off. We have a modest home of modest value. But when I look at our net worth i ONLY look at my accounts that are monetary, stocks, bonds, bank accounts, etc that is all real money. I don't add in our cars or any other possessions. I feel like what really matters is liquid value. I mean, yes we could sell our home and take a bit of profit if we had to sell and buy another place. But, honestly the way real estate is, we could sell and end spending more than we would get anyway a would be at a point in life to want different things, etc

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                  #38
                  Zillow is all over the map.
                  Sometimes it is accurate, but definitely hit or miss.

                  I had my house appraised in the fall of 2018 when I did a refi, and the current Zillow estimate on my house is spot on with the appraised value
                  But, that would suggest that the value is a bit higher now than what Zillow is saying.
                  Housing prices are skyrocketing where I live.
                  I'd guess that my home is worth $25K more than what Zillow says.
                  I'm not selling, so it really doesn't matter right now.


                  Brian

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                    #39
                    I don't count a principal residence as either an investment, nor part of net worth. It's an expense, just like paying rent. The only folks interested about the worth of your house are your heirs, who will fire sale it when you lay down for your dirt nap.
                    Never underestimate the power of stupid people in large groups.

                    -George Carlin

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                      #40
                      Originally posted by TexasHusker View Post
                      The only folks interested about the worth of your house are your heirs, who will fire sale it when you lay down for your dirt nap.
                      Exactly, so Net Worth is a tool when you consult with your lawyer for estate planning . He/She will want to know the approximate size of the estate being dealt with You can use your fire sale valuation in your Composition and Value of Estate. The lawyer might have different suggestions on how to handle things if you have a net worth of 100,000 vs 2,000,000 vs 20,000,000.

                      There are other things included in the size of your estate such as life insurance. Most of the time, (term) life insurance would not do you a lick of good in life (unless you have a terminal illness and you have a provision in your insurance to be able to use some of it before you pass away OR if you sell your policy to someone else in a life settlement).

                      I lifted the following from the Washington State Department of Revenue:
                      Examples of Property
                      Tangible personal property includes, but is not limited to:
                      • Antiques
                      • Artwork
                      • Boats
                      • Furniture
                      • Jewelry
                      • Machinery
                      • Tools
                      • Vehicles

                      Real property includes, but is not limited to:
                      • Bare land
                      • Condominiums
                      • Houses
                      • Mineral interests

                      Intangible personal property includes, but is not limited to:
                      • Annuities
                      • Bank accounts
                      • Business interests
                      • Bonds
                      • Interests in partnerships
                      • IRAs
                      • Life insurance
                      • Retirement plans
                      • Royalties
                      • Stocks

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                        #41
                        Edit: Whoops! Confused two different threads.
                        Last edited by ua_guy; 03-17-2021, 06:13 AM.

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                          #42
                          With our last house (currently renting), I used the following formula to calculate the home estimated "cash out" value:
                          Started with purchase price (no mortgage) - 8% (the 8% was for the eventual sales related costs).
                          Then I adjusted by CPI-U

                          When we sold, we cashed out for a bit more than the value on our net worth statement. It wasn't a surprise; I wanted my valuation to be on the conservative side.

                          For our next house (currently building and again there will be no mortgage), I plan to use purchase price - 6or7% (real estate commissions have come down) and then adjust by CPI-U.
                          Last edited by scfr; 03-29-2021, 02:09 PM.

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                            #43
                            Originally posted by srblanco7 View Post
                            I do not track the value of our primary residence as part of our NW. We track solely our investments (retirement and brokerage accounts). I certainly understand those who do include the value of their primary residence. Do others track items beyond that (e.g., stamp or coin collections, jewelry, vehicles, etc)?
                            I include house & vehicles. I don't include other items because: I'm too lazy to calculate, we don't own high value "other" things, and including them wouldn't help me achieve my purpose for calculating my net worth which is to keep a scorecard of our overall financial performance over time.

                            I do sub-totals for financial & non-financial assets, and then the "grand" total.

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                              #44
                              Originally posted by Like2Plan View Post

                              Do you feel the same about listing pretax assets in a retirement account?
                              Great question! Personally, I discount those for the eventual taxes that will need to be paid. I have been using 15% but I know I need to raise that.

                              Comment


                                #45
                                Originally posted by rennigade View Post

                                Our home also represents a small portion of our money. Im guessing thats why people like us couldnt care less what our home is worth. We're not planning on selling anytime soon, and it represents a small fraction of our portfolio. Its always the ones who are house poor who include it in their nw, or typically I should say. There are exceptions to the rule.
                                Household 1 has US$2 million in financial assets and a US$475K paid-for home plus 2 automobiles worth a combined US$25K.
                                Household 2 has US$2 million in financial assets. They rent a home that has a value of $475K (on their landlord's balance sheet) and are leasing 2 vehicles.
                                If all other variables are equal, do you really think that those 2 households are in the same financial shape?

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