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Old 06-18-2010, 01:44 PM   #41
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If you read my earlier post you will probably come to the conclusion that I have way too much of our NW tied up in the house; however, we are willing to pay the price to make sure we are in a neighborhood we like and enjoy, not having little kids running all around and throwing junk in the yard, cars up on blocks and everyone doing their own oil changes, reving engines while being tuned up, wild a** parties with left over beer bottles in the morning and the value of your house going down hill because some idiot won't maintain his. Sorry, but I've been down that road. At 74, I don't need that kind of trouble. So, moved to an area where we don't have to worry about this kind of stuff. In our case, this required more outlay for the house; however, we are willing to spend more to get this life style.
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Old 06-18-2010, 02:03 PM   #42
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It is difficult to make a comparison based on Net Worth because many people have income streams that, if capitalized, would raise their Net Worth substantially.

That being said, I will give you the perspective of a "pure" ER -- That is, single guy, mid-40s, with no income streams (except Social Security in 25 years) just liquid assets.

My plan is to hopefully buy just ONE place in my lifetime (I have never yet owned, nor do I plan to do so in the near future). That means I need a lot of familiarity and comfort with the location where I would buy, and would buy only for the long term, and pay cash.

I would have to say that my maximum comfort level now would be something like 8% of net worth. If I were 60, within 10 years of Social Security and fewer years of life expectancy, I might raise that to something like 12%. These numbers would have to include initial furnishing and startup costs, also.

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Old 06-18-2010, 02:32 PM   #43
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...
My plan is to hopefully buy just ONE place in my lifetime (I have never yet owned, nor do I plan to do so in the near future). That means I need a lot of familiarity and comfort with the location where I would buy, and would buy only for the long term, and pay cash.

I would have to say that my maximum comfort level now would be something like 8% of net worth. If I were 60, within 10 years of Social Security and fewer years of life expectancy, I might raise that to something like 12%. These numbers would have to include initial furnishing and startup costs, also.

Kramer
Ironically, we rent NOTB because the price/rent ratios have been out of sight for over a decade.

But we bought in Mexico for 8% of our net worth. We also sublet our NOTB place while we are in Mexico so its net cost is about 0.4% a year. ultimately, we might leave our NOTB place and just travel in the summer but we are not ready for that yet.
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Old 06-18-2010, 03:29 PM   #44
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I remember participating in a thread where people talked about their RE value(s) as a percentage of their net worth. I can't seem to find that thread now.

For me, even with 2 houses, the RE portion is less than 1/2 of my portfolio. This means that my homes together are less than 30% of my net worth. This percentage is perhaps a bit higher than some people here, but still lower than that of many Californians.
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Old 06-18-2010, 06:56 PM   #45
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If I'm retired, can live off my pension and SS, the %age of my net worth tied up in my home doesn't mean anything, does it?

In my case, I own two homes outright, and together they are ~40% of my net worth. So what? If I need the money, I will sell one of my homes.

Is there something I'm missing?
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Old 06-18-2010, 07:03 PM   #46
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.

Either way good for you!
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Old 06-18-2010, 07:40 PM   #47
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Ours is close to 50%. However, this is of no concern. We depend on pensions and SS for our income, so the house represents an abnormally high percentage. If I converted the pensions to present values, the this percentage would go down considerably.
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Old 06-18-2010, 08:43 PM   #48
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Ours is close to 50%. However, this is of no concern. We depend on pensions and SS for our income, so the house represents an abnormally high percentage. If I converted the pensions to present values, the this percentage would go down considerably.
Yup. Your pension and SS if converted present values would dilute the percentage you hold in RE for sure. If it's working for you, that's great. Keep on keeping on. The point is to be secure and enjoy your life. Sounds like you're there Rustic.
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Old 06-18-2010, 08:58 PM   #49
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Figuring out the percentage for me is difficult.

We bought a house a few months ago. If I just considered that cost (and not the income tax on money we had to withdraw from retirement accounts to pay for part of it), then it would have been about 14% of net worth (actually a little less). But we intended to do some extensive remodeling so that percentage will go up.

Long story short, 3 months later, it is clear that the remodeling is not feasible. We considered simply selling and starting over. However, we love the location and over half of the value of the property is land value plus outbuildings and other improvements other than the house. So we plan to demolish and build new on the land.

This will result is a much higher percentage of net worth tied up in house. I know what our net worth would be if we hadn't bought the house.

Figuring out how much is tied up in it is complicated. If we do demolish and build a house is it what the new house would sell for? Is it what we paid to buy the house and then build the new house? If it is the latter do we include the income taxes paid on the money we take out of retirement accounts to pay for it (I tend to think not since we would have paid taxes on the money eventually any way). Using our cost (but not including taxes), the percentage will be about 35%.

I did fairly extensively look at firecalc and my spreadsheets and long time budget to decide whether what would remain would be adequate to support our needs.
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Old 06-18-2010, 09:24 PM   #50
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The correct amount to have in RE is dependent upon many factors. About 60% of my mother's net worth is in her paid off condo. ....

She's 80 and receives a generous government pension (old CERS) and social security (from her 2nd husband). She has no worries about health insurance and has long term care insurance. I think she's in fine shape financially.
Actually to answer the question correctly you have to calculate the Asset value of the pension to make the comparison, or alternatively use the imputed income of the house. Assume for the purpose of discussion a 60 year old single person owns stocks and a home each worth a million and an inflation protected pension and social security giving $60,000 a year. The pension is worth substantially more than either the house or the stocks. Th person has about a third of their assets in each of equity, real estate and inflation protected fixed income.
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Old 06-18-2010, 09:52 PM   #51
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.

Either way good for you!
I guess you are not including the big cities on the Gulf Coast.

When we refinanced through an online lender, the mortgage broker said our home would be worth over a million dollars where she lived in San Diego. It ain't in San Diego and it ain't worth over a million dollars.
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Old 06-19-2010, 06:24 AM   #52
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Not retired yet. Rough estimate is that home is currently a tad over 16%. It will be around 12-14% when we punch out in about 925 days (knock on wood), assuming the value of the port rises but RE values languish. Home is free and clear.

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Old 06-19-2010, 09:10 AM   #53
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My house represents 18% of my net worth and it is fully paid for .
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Old 06-19-2010, 09:42 AM   #54
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House is 22% of our net worth. Still paying the mortgage (and debating if we should pay the d*** thing off-about a $60,000 balance).
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Old 06-19-2010, 10:18 AM   #55
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Am I in trouble? My house is about 65% of my NW. I was hoping to bring that down to about 50% by building up invested assets, at which point the 4% SWR rule makes me FI. I know I could try to sell the house and rent, which would allow me to live on 4% immediately, but I was trying to reach FI with mostly my current lifestyle. Sounds like I have way more tied up in the house than the successful ERs here.
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Old 06-19-2010, 10:32 AM   #56
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.

Either way good for you!
....or we live in a type of housing which is low-cost. For me, I live in a studio apartment in a large co-op complex , an apartment which is worth about $100k. I have about $1M in investments, hence the apartment's share of my NW is about 9%.
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Old 06-19-2010, 10:39 AM   #57
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Am I in trouble? My house is about 65% of my NW. I was hoping to bring that down to about 50% by building up invested assets, at which point the 4% SWR rule makes me FI. I know I could try to sell the house and rent, which would allow me to live on 4% immediately, but I was trying to reach FI with mostly my current lifestyle. Sounds like I have way more tied up in the house than the successful ERs here.
It doesn't matter what the other early retirees do - - what matters is that you are happy in retirement. The fact that many of us have a smaller percentage of our net worth in our homes, should only make you think, "Would I have a happier life if I did that?" But your decision should depend on the answer to that question, not on what we choose to do.
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Old 06-19-2010, 10:49 AM   #58
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.

Either way good for you!
Different strokes for different folks. I would simply refuse to live in an area where a nice home costs nearly a million dollars. I know from experience living in such areas that I wouldn't get the value out of it. (Someone else might). To me that seems absolutely ludicrous when I could live in a much nicer home for a fraction of the price, in a perfectly enjoyable location with lower housing costs. Each to his/her own. We all make consumer choices and then live with them.
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Old 06-19-2010, 10:54 AM   #59
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It doesn't matter what the other early retirees do - - what matters is that you are happy in retirement. The fact that many of us have a smaller percentage of our net worth in our homes, should only make you think, "Would I have a happier life if I did that?" But your decision should depend on the answer to that question, not on what we choose to do.

+1...can't add a thing to that!
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Old 06-19-2010, 10:55 AM   #60
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House is 22% of our net worth. Still paying the mortgage (and debating if we should pay the d*** thing off-about a $60,000 balance).
Don't try to hide behind your smiley!

In your mere 45th post, you already tried to stir up trouble by bringing up the m*rtg*g* controversy. If that's not reason for censure by the mods, I don't know what is.



Just kidding of course.

I have always thought lively discussions are fun. But then, I stayed away from the political forum, back when it was still open.
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