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Old 02-27-2021, 07:04 PM   #41
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I think some are talking about different concepts. That is some are talking about house cost as percentage of net worth and others are talking about current value as percentage of net worth. I would also say there is a difference between house cost and mortgage value.

Personally I don't think house cost v. net worth is very important.

To me the more relevant factors:

1. What is your debt to income ratio. if you have a mortgage, will the cost of that mortgage (plus taxes and insurance on the house) allow you to easily make those payments and have enough money to do whatever you want.

2. If you are paying cash for a house or putting down a large down payment, how much money does that leave you? Will that leave you enough money for all of your needed and discretionary spending.

I see this as personal. That is if you spend half your net worth on a house and you still have enough money for all the spending you want to do then fine. If you spend 15% of your net worth on a house and you can't cover your bills afterward then that is a problem.
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Old 02-27-2021, 08:10 PM   #42
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we've been in our home sinxe 1988. in those days our home was a much larger % of our NW. these days it's about 10% of our NW.
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Old 02-27-2021, 09:02 PM   #43
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Home is about 10% of NW, or about 12% of non-home net assets. Tax, insurance and maintenance come to about 3.5-4% of budget.
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Old 02-27-2021, 09:13 PM   #44
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Originally Posted by WhenIsItTime View Post
My house might be worth 30% of my net worth, but if it is fully mortgaged then isnít it 0%.

Seems question might be asking about home equity tied up in real estate or trying to get at home operation costs which could vary wildly from home FMV or purchase price.

What is the real ??
Your net worth should incorporate the debt owed on your house. So for us I would calculate it as the value of our home plus other assets, minus any debt we carry.

And agree with others who have said itís a different question if itís grown due to appreciation vs original purchase, but that appreciation still usually comes with tax consequences, etc. and if you wanted to sell and purchase something equivalent in the same area, the cost would be the same.

Ours is high. But I like where we live and we can afford it. If that changes, hopefully that gives us options.
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Old 02-28-2021, 05:17 AM   #45
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I disagree with the premise.

I always suggest buying the house you need, not the house you can afford.
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Old 02-28-2021, 05:20 AM   #46
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If you can retire safely on NW-HP, you're good to go. Percentage doesn't matter.
+1. Ours happens to be 7%.
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Old 02-28-2021, 05:35 AM   #47
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Ours is around 18%. Was a lot higher when we bought 24 years ago....maybe 30% then.
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Old 02-28-2021, 05:36 AM   #48
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Reflecting back about 50 years my first very modest house we bought on an auction from an estate and needing a lot of work cost us $17k with a 8.75% interest. Our combined gross income was about the same. I quickly learned how to do all the repairs or do without. Those were very lean years of living pay check to pay check. Our entertainment was to walk around the shopping mall where there was air conditioning. It was Florida and hot. Our net worth consisted of the $2k down payment on the house and a VW beetle but with a mortgage. It is amazing what you can do if young and motivated with a plan.
Things are much different now. If the value of our house where we presently live is included in our net worth then it is about 14% but there is no mortgage.


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Old 02-28-2021, 06:33 AM   #49
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Our house is about 9% of our current net worth. We bought it about 30 years ago.
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Old 02-28-2021, 06:47 AM   #50
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The value of of the house/assets has been done a number of times. usually it is done as a poll



I doubt you want to use the cost in 1991.


nah


value/assets < 5%
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Old 02-28-2021, 07:47 AM   #51
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The market value of our house is about 20% of net worth. The basis is probably around 7% of net worth. The all in costs of mortgage payments, property taxes, and maintenance, who knows but probably a wash on what it would have cost to rent equivalent space.
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Old 02-28-2021, 08:01 AM   #52
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In my case, when I bought the house, in 2018, its purchase price represented about 30.2% of my net worth. A more important figure is how much did I borrow, as a percent of investible assets. In that case, it wasn't that much different actually, about 26.7%.

I figure the total net worth number is relatively meaningless, since it includes equity, not only in the house I bought, but also in another property I own. That equity doesn't really give me any income to live off of, to help pay the mortgage, unless I borrow against it.

Fast forward to today, and the purchase price of the house is about 24.3% of my entire net worth. The outstanding mortgage is about 20.5% of my investible asset value.
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Old 02-28-2021, 08:16 AM   #53
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Thinking back to 1999, we moved to Dallas and had a 20% down & little NW. Heck, I didn't know what NW was...

Moving to LA on 2007, it was closer to 30% of NW (before the move).

Renters for 8 years, and returning to Dallas in 2015, probably 27%

2021 in the 2nd home in 6 years, we're at 18% & comfortable with this.

Home taxes, insurance and maintenance are 33% of basic spending (minus travel & renovation). This is something we could improve if living outside the city, but we're 1 street from DD & DGD... not going anywhere soon.

I'd say the % of monthly spending is something to watch more than % of net worth. Or maybe they track similarly? Depends on appreciation rate of all assets?
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Old 02-28-2021, 08:30 AM   #54
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Yeah, more math questions.
Saw a post recently that looked like this...


NW - real estate = ?, divide by your annual spending equals a figure.
The OP had 43 and members said thats ok.
Where is the chart so I can see whats not ok.
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Old 02-28-2021, 08:38 AM   #55
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We are at about 8%. But we are considering a 2nd home that would push it to maybe 17%. I fall into the camp that believes there are too many variables for % of NW to be very useful. A sustainable WR after NW-HP would be my benchmark. That is the measure I am using while considering a second home.
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Old 02-28-2021, 08:44 AM   #56
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Originally Posted by rafapark View Post
My apologies if this question has been asked before but I did a quick search and could not find the answer. Curious on what % of net worth is a good number to have invested in a house. I am talking primary residence. The reason I ask is that we are retired, 64YOs, we are building a house and it is ending up costing around 15% of our net worth. I was wondering what other people have in a similar situation.
I agree that this number will vary with age and location.

For example, we bought our current home in 2009 for $42K. We had a net worth of less than $200K then so it was a little under 20% of our net worth at the time.

Nowadays we could probably sell it for around $65K but our net worth has climbed to $1.25M so our home only makes up around 5% of our net worth.

Seems like a good number to start with but your 15% now could be 5% ten years from now.
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Old 02-28-2021, 09:28 AM   #57
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I agree that this number will vary with age and location.

For example, we bought our current home in 2009 for $42K. We had a net worth of less than $200K then so it was a little under 20% of our net worth at the time.

Nowadays we could probably sell it for around $65K but our net worth has climbed to $1.25M so our home only makes up around 5% of our net worth.

Seems like a good number to start with but your 15% now could be 5% ten years from now.
1.05 growth in 11 years... Impressive.
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Old 02-28-2021, 09:41 AM   #58
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21.8% of NW (which included the home)
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Old 02-28-2021, 09:42 AM   #59
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I disagree with the premise.

I always suggest buying the house you need, not the house you can afford.
The house I "need" is 2BR (or 1BR with a guest futon somewhere), 1 bath room, a kitchen, eating area and small living room. That's not what I'm going to live in though.

I think you mean buy the house that meets your wants and needs. Then it helps to determine what you can afford, to see if you have to give up features you really want.
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Old 02-28-2021, 09:43 AM   #60
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1.05 growth in 11 years... Impressive.
Thanks!

Been maxxing out 401(k), IRA, (R)IRA and HSA accounts for the last 5 years or so. Was putting away at least 20% of income before that. Now it's closer to 50% with the house paid off and no car payments.

Plus, the 11.2% average annual rate of return on my Vanguard and 11.12% on my JH funds over the past 10 years certainly helped.
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