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Old 06-27-2010, 05:36 PM   #101
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It may be because we are past 5:00 and our bar is open, but I don't understand your Value of House. We have a 5.6% loan on $100k and pay $600 a month no taxes or insurance included. That means that $7,200 will purchase less than $100,000 home. I don't understand where you get $500,000.
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Old 06-27-2010, 05:52 PM   #102
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It may be because we are past 5:00 and our bar is open, but I don't understand your Value of House. We have a 5.6% loan on $100k and pay $600 a month no taxes or insurance included. That means that $7,200 will purchase less than $100,000 home. I don't understand where you get $500,000.
I guess the bar is open. Read the first sentence of my post.
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Old 06-27-2010, 05:55 PM   #103
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"A house is not an investment?" . "It's an expense?."............ Hmmmm? I purchased my lakefront home seven years ago for $150K and it recently appraised for $350K (and it's paid for). I can fire sale it tomorrow for $250-300K, and realize at least $50K in clear profit after all taxes, expenses, etc. Assuming I die first, my DW can also reverse mortgage the house if she wants added income. Or we can sell it and use the assets to rent or buy a small non-waterfront condo etc.and put $150 to $300K in the bank.....yet you consider it an 'expense'...Interesting.
I agree that a house is an investment. It may be a good investment, or a bad investment. It is certainly not a liquid investment. Many homeowners in the US who needed to liquidate their investments in the past couple of years found that out the hard way. OTOH, after my parents passed away, I sold the home they had invested lived in for over 40 years. The internal rate of return on that particular investment was almost 11% per annum.
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Old 06-28-2010, 03:30 PM   #104
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...OTOH, after my parents passed away, I sold the home they had invested lived in for over 40 years. The internal rate of return on that particular investment was almost 11% per annum.
But you never factored in all the maintenance expenses that they had to pay in those 40 years. My brother made out OK because he refused to maintain his house and it was sold as a teardown. But that is not how most people choose to live.

There is investment, expense, lifestyle expense and emotion. All are at play in a house. Then there is mandatory leverage called a mortgage. Some people call it forced savings. Leverage just amplifies the experience one way or the other.
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Old 06-28-2010, 10:46 PM   #105
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We have 0% of our money in a house. In early 2006, we sold our house in DFW and hit the road FT.

We thought that seeing the USA would help us decide where we wanted to live someday when we "grow-up". Seeing place has made it harder, so many places that we like- and some we could afford.
It's also similar to getting out of the stock market. Once you're out, when do you get back in? And how much do you get back in, and where??
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Old 06-30-2010, 06:02 PM   #106
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But you never factored in all the maintenance expenses that they had to pay in those 40 years. My brother made out OK because he refused to maintain his house and it was sold as a teardown. But that is not how most people choose to live.

There is investment, expense, lifestyle expense and emotion. All are at play in a house. Then there is mandatory leverage called a mortgage. Some people call it forced savings. Leverage just amplifies the experience one way or the other.
My parents did one big renovation and regular maintenance. But they never had a mortgage. They were that kind of people.....
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Old 07-01-2010, 02:54 PM   #107
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My parents did one big renovation and regular maintenance. But they never had a mortgage. They were that kind of people.....
Did you factor in the renovation and annual maintenance when calculating the return on investment?

(Most people don't BTW)
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Old 10-05-2010, 05:23 PM   #108
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Kevink, I'm considering the same question. I have a small 600 sq. ft. condo that I paid $114k cash for at the end of 2008. I thought I made a good bet at the time because the same place sold for $195k back in 2004, but looks like prices are lower by another $20k if I want to sell now. The kicker is that a better condo two doors down is now on the blocks for $117k. It's bigger at 938 sq. ft., and it has a separate bedroom. I'm thinking I'll go offer $70k cash and see if the bank takes it. The down side of course is having more of my non-retirement cash tied up in RE, and I'll need to become a landlord, but if the bank takes $70k, then it's a steal.
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Old 10-05-2010, 05:33 PM   #109
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Would you like for me to just send you a check for my share of your scam?
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Old 10-05-2010, 08:30 PM   #110
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Would you like for me to just send you a check for my share of your scam?
I don't know what scam you are referring to. Please elaborate, or perhaps you just haven't had your beer yet.
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Old 10-05-2010, 08:47 PM   #111
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Excuse me, my bad. I read your post incorrectly.

Oh yeah, I don't drink, it just seems that I do.
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Old 10-05-2010, 08:49 PM   #112
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Oh yeah, I don't drink, it just seems that I do.
All the fun without the expense or the hangover. Such a deal.
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Old 10-07-2010, 10:53 AM   #113
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You have a declining asset and you are planning to double down to make sure you fully capitalize on it! (Well 70K is not exactly double, more like a DRIP.)
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Old 10-07-2010, 10:59 AM   #114
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Yeah, double down it is. Very tempting, but also very concentrated risk with two cash units in a single building. Will have to think very hard on this.
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Old 10-07-2010, 11:59 AM   #115
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Will be paying off mortgage at end of month. House will be about 40% of net worth. Under 40, so still very much in the accumulating phase.

Current house payment is about 1/6 of monthly income.
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Old 10-07-2010, 01:34 PM   #116
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I can't think why it would be important to me, now that I've retired, but just out of curiosity and to compare with you all, I just calculated that my house is about 80% of my net worth, not counting state pension and SS income. I doubt that it makes any sense not to count that, so I added to my net worth 20 times my pension income (pretending my pension is 5% interest of hypothetical savings), and then I come up with 25% for proportion of net worth tied up in my house. Is that something like how you figure?
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Old 10-07-2010, 01:41 PM   #117
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I can't think why it would be important to me, now that I've retired, but just out of curiosity and to compare with you all, I just calculated that my house is about 80% of my net worth, not counting state pension and SS income. I doubt that it makes any sense not to count that, so I added to my net worth 20 times my pension income (pretending my pension is 5% interest of hypothetical savings), and then I come up with 25% for proportion of net worth tied up in my house. Is that something like how you figure?
I think the original purpose of the thread was to see how leveraged some people may be, but we're always trying to decide whether home equity is considered to be part of net worth. I include it but others do not.

I don't know much about Hawaii pensions but you could consider your monthly check to be the income stream thrown off by a portfolio of the state's general obligation bonds... at whatever yield seems reasonable. The size of the bond portfolio that it'd take to produce your pension check would be the net worth of your pension income. If your pension included a COLA then you'd be into I bonds or TIPS territory.

This thread's house/net worth ratios are all over the map because of these calculation differences and the country's varying values of land. I think Hawaii tends to have a much higher percentage of dead equity.
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Old 10-08-2010, 09:31 AM   #118
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Home equity is interesting but only relevant if a portion of it can generate income or offset rent.

A pension can be added to net worth by using an annuity calulator.
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Old 10-08-2010, 11:32 AM   #119
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Home equity is interesting but only relevant if a portion of it can generate income or offset rent.

A pension can be added to net worth by using an annuity calulator.

Home equity results in foregone income but home ownership generates imputed income equal to the net rental value. It is untaxed income which makes it nice.

in general the rental value of houses often does not cover the true full cost of Insurance, repairs, taxes and interest on the full costs. Many people value their living in their own home at a higher level than the rental value, which makes the purchase economically rational

We own our home outright. Its net rental value after tax payments and repairs is effectively income You can "back calculate" a value for that income in dong an asset calculation. In our case its about 3/4 of the sale value, but its tax favored status makes it a wash.
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Old 10-08-2010, 06:17 PM   #120
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Same here. I like owning my place free and clear. Represents about 15-20% of my NW.

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I like owning my house free and clear. It is a nice, solid house, in a nice neighborhood, and more than big enough for me. It was really comforting for me to have no mortgage payment or rent to pay during the economic collapse.

Personally I would balk at living in a location where a paid off house that I liked would represent more than 20% of my net worth. I guess my present home represents less than 15% of my net worth. But that is just me, and each to his/her own - - there are plenty of people with more than that in their homes and if they are happy, then that is the right choice for them.
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