ER, home value and net worth

[daylatedollarshort]

That's true, but why work for the money if you don't enjoy it? If having a large, nice property brings you enjoyment, the dollars are well spent. It's all a matter of priorities. Money for the sake of money's sake isn't what it's about for me. It's about the experiences we have with it.

I don't think most posters here have anything against expensive homes. But if it means putting all your retirement nest eggs in one basket, it is a risky strategy, especially in an area that historically has had a boom and bust kind of local economy.

 

[NW-Bound]

If you wished to sell Wellesley today, you could find out what it's worth - today. The vast market tells you what your stocks are worth.

If you wished to sell your house, you would have to find potential buyers and negotiate a selling price. The one ultimate buyer tells you what your house is worth.

When I was looking to purchase a 2nd home, the elderly couple who owned it had put it on the market for $420k 15 months earlier. They dropped the prices some, took it off the market for a month, put it back on the market, dropped the price again - no buyers. I bought it for $330k.

Compared to RE, the liquidity of stocks/bonds is unbeatable.

I helped my daughter buy her first home in March 2011. She got it for 38% of what the previous owner paid in April 2008, which was already past the bubble burst point.

She sold it last year for 2.3x what she paid, but that was still only 88% the price the previous owner paid.

At that time in 2011, I thought about buying a couple of these town homes, which are in a very nice resort area, for myself as investment properties and I had cash to pay for them. The homes were going for less than what it cost for the land and material to build them. Crazy! My wife was scared, and said that the maintenance costs like taxes and HOA would cost us more money while waiting for the market to turn around (I would leave the homes empty as I do not care to be renting them out).

So, I did not buy. It's OK, as my stocks have been up just as much and buying/selling them is just as easy with a 7-figure amount as it is a 3-figure one. Buying RE on dips is just not as simple as a mouse click.

 

[Clone]

That's true, but why work for the money if you don't enjoy it? If having a large, nice property brings you enjoyment, the dollars are well spent. It's all a matter of priorities. Money for the sake of money's sake isn't what it's about for me. It's about the experiences we have with it.

As DLDS said, nothing against living in expensive houses, or enjoying your money. The context of owning a large house and entertaining instead of accumulating money for retirement is where the discussion comes from. There are many examples of folks who spent their money having experiences, and are unable to retire or are in a pickle when the job disappears or their body gives up.

 

[NW-Bound]

As DLDS said, nothing against living in expensive houses, or enjoying your money. The context of owning a large house and entertaining instead of accumulating money for retirement is where the discussion comes from. There are many examples of folks who spent their money having experiences, and are unable to retire or are in a pickle when the job disappears or their body gives up.

+1

The home I like is one of those in a specific location. If I sold my 2 homes and put up more cash, maybe I can buy it, but then the remaining investable assets would not be enough to pay for the home upkeep and also to give me the lifestyle I want, at the WR low enough to let me stay calm during a market downturn.

Yes, the joy of owning such a home must be balanced against the sleepness nights I might have. It boiled down to my dream home being out of my class.

 

[brucethebroker]

I don't use net worth as a number or tool for my retirement worth. I use only money assets for a number of worth.

My home and ranch would be a number that would be only a guess what the real value would be at any given time.

There has been a lot of good input and thoughts on this thread of how people look at their own worth.

But your mutual funds/stocks are also only a guess what the real value would be, right? Based upon yesterday's close in many cases? The market can go up or down between when you want to sell and when the sale is competed. So you take your best guess on valuation.

Net worth is really a guess determined at a particular point in time, and that is all it is.

Ideally, folks adding up the net worth of qualified retirement type investments (IRA, etc.) would take the net value of funds after paying taxes on withdrawals. My guess is that most people do not do that-they look at the numbers on their current statement. And even if they do figure in the taxes, they are projecting that they would liquidate over a certain period of time, to gain the best tax advantages. Again, more guessing.

 

[NW-Bound]

But your mutual funds/stocks are also only a guess what the real value would be, right? Based upon yesterday's close in many cases? The market can go up or down between when you want to sell and when the sale is competed. So you take your best guess on valuation.

Net worth is really a guess determined at a particular point in time, and that is all it is.

Ideally, folks adding up the net worth of qualified retirement type investments (IRA, etc.) would take the net value of funds after paying taxes on withdrawals. My guess is that most people do not do that-they look at the numbers on their current statement. And even if they do figure in the taxes, they are projecting that they would liquidate over a certain period of time, to gain the best tax advantages. Again, more guessing.

Yes to that too.

But I still pay more attention to investable assets, because I can do something about it. Homes, not so quick. I cannot buy or sell RE that quick. I am not a day trader, but like to shift my AA around a little bit, or overweight/underweight this or that sector, if I feel like it.

About taxes, it's a good point. I account for that by having taxes included in my total expenses, and checking that WR against the current stash size.

No freebies anywhere in life, I guess.

 

[street]

I'm not disagreeing with your thinking at all. I personally don't look at net worth or use it as the most current worth for myself.

I have a ranch and if the market said today I should get X $ and it doesn't sell for 2 years what really is it worth. With funds and markets is more of current value of worth to me then real estate values.

I also agree that there is some guess even in the market and when you sell etc.

 

[FIREHAPPY]

I purchased a more expensive home in 2014 in order to have a larger % of net worth in real estate. We lived in our first home 25+ years and it was time to move up a bit. Retired in 2016 at 54.

I did not include the home value in the retirement analysis when evaluating our ability to FIRE. I do include the home value in the net worth analysis now since I could sell it and pay rent in a senior living or assisted living facility for more than a decade. I view it as my long term care insurance policy.

 

[MarieIG]

As far as net worth, if I were to calculate net worth, the house would be part of that. When I think about retirement, I think of the house in terms of what it costs to run/ maintain, including a budget for big ticket maintenance.

At this point, we have no intention of downsizing in retirement. The plan is to move to a lower cost of living area and buy a larger home - with plenty of storage space. But we will need to try renting in any area before buying, in case we don't like it.

 

[pb4uski]

It's worked out fine for an old college buddy of mine...so far.

The small home he bought in a suburb of a large California city (not LA or SF) 15 years ago has grown in value from ~$400,000 to $1,500,000.

However looking on Zillow shows the last million of that increase has come only in the last 5 years.

So while we see increasing numbers of people concerned about a stock market bubble, it's scary that there are those who live in HCOL areas that still seem very confident (here and on bogleheads) their home values will never go down.

That last part is scary... part of what got us in a whole heap of hurt a decade ago.

 

[RAchip]

I purchased a more expensive home in 2014 in order to have a larger % of net worth in real estate. We lived in our first home 25+ years and it was time to move up a bit. Retired in 2016 at 54.

I did not include the home value in the retirement analysis when evaluating our ability to FIRE. I do include the home value in the net worth analysis now since I could sell it and pay rent in a senior living or assisted living facility for more than a decade. I view it as my long term care insurance policy.

I agree with this line of thinking. If you own real estate, including your primary residence, it can be sold and you can transition to a different living situation if necessary (renting, smaller home, assisted living, etc etc). So I also look at it as a type of insurance or bonus asset.

 

[Marita40]

Since the only time in my entire life that I’ve told anyone about my net worth is this forum, it doesn’t matter to me in the least whether I include the house or not in the tally! My house is about 14% of my nest egg. I have no plans to move in retirement, except to a nursing facility should I need to, but if disaster strikes I could downsize.

 

[Scuba]

I agree with this line of thinking. If you own real estate, including your primary residence, it can be sold and you can transition to a different living situation if necessary (renting, smaller home, assisted living, etc etc). So I also look at it as a type of insurance or bonus asset.

+1