+1Totally correct on Net Worth.
But this is why NW is not particularly useful for certain things, like deciding if you are able to retire...
+1Totally correct on Net Worth.
But this is why NW is not particularly useful for certain things, like deciding if you are able to retire...
+1 againCorrect, depending on whether the annuity has a guaranteed period. Mine had a ten year guarantee, so that would be added to the $500k...
Nah. Net worth is current assets - liabilities. Basically liquidation value (AKA your estate) if you keel over today. Future income streams are income, not assets (you can't sell them), and are out. Houses are always in.
If you are excluding material assets (like home equity) you are not calculating net worth, you are calculating your investments or your portfolio or something else.
+1
However, net worth is nice to know, but your ability to maintain a certain lifestyle is based on cash flow.
About real estate values, a guy like Calmloki can generate beaucoup cash flow from his rentals. For a home owner like me, my 2 homes just show up as expenses on Quicken. Yes, the imputed rents are worth something too, but they are not as good as income from other more liquid investments.
Wouldn't imputed rent be already accounted for by the fact that you don't have rent as part of your expense? So the imputed rent is cancelled out.
But of course.
I was suggesting that if you sell the home and invest the money, perhaps the investment income will be higher than the imputed rent.
But then, as daylatedollarshort said, if a $3M home in Northern CA rents for $10K/month, then the $120K/year rent is 4% WR on a $3M 60/40 portfolio.
So, perhaps RE and liquid assets generate roughly the same magnitude of income. What's better varies with the individual cases.
OK, I'll ask.... Why not sell it?Not only that, but the RE rental owner is at the mercy of the government in terms of ever-changing laws and regulations that put the "rights" of tenants above the "rights" of rental owners. It is for this reason that I have an inherited rental unit sitting empty for almost a decade. I'd rather eat the costs of maintenance and tax than be at the mercy of a difficulty tenant that I can't get rid of.
OK, I'll ask.... Why not sell it?
Sounds like the makings for a soap opera.
That's cool, if it was a gift you're not out much eh?
Hehe, yeah, your share of the expenses eh? Thanks for nothing!
We have been asked to help with a tenant eviction at a trailer park (if the sheriff doesn't show) by a rich friend of my wife (just sold house for 3 million)
So...a friggen trailer park? Should I pack a gat? Whass uupppp?
Nah, don need no stinkin' real estate drama eh?
LOL, hardly anybody here with multimillion dollar homes and $1K property tax bills are in a rush to sell their homes. That Prop 13 is worth more and more every year. Some people on our block put in a tiny ADU and were asking $2K a month rent for it. It is legal now statewide to have a converted garage and ADU to help with the housing shortage.
In other cases, I don't know the owners, just the renters, but a couple of friends of our kids have moved into homes with something like five bedrooms and a converted garage. The owners charge around $1K a month per room, like a boarding house.
There is even a name for homeowners not selling, the "lock-in effect" - https://www.nber.org/digest/apr05/lock-effect-californias-proposition-13: "As a result of Proposition 13, there are obvious distortions in the real estate marketplace. For example, in 2003 financier Warren Buffett announced that he pays property taxes of $14,410, or 2.9 percent, on his $500,000 home in Omaha, Nebraska, but pays only $2,264, or 0.056 percent, on his $4 million home in California. Although Buffet is known as an astute investor, the low property taxes on his California home are not attributable to his investment prowess, but rather to Proposition 13."
ETA: There is a new law that makes the property tax more portable, but I don't know anyone who has used that yet. Most of our friends are still in the same homes they've had for years.
In the San Francisco Bay Area rent is approx 0.35% of cost per month.
$1,000,000 house (shack)
$3,500 rent
Property tax, insurance and maintenance would more or less equal the rent. Meaning approx rental income of your home is zero.
The net worth value of the home is still valid but only appreciation will be the investment return ... which has been quite good recently.
Sell quick and rent.
Exactly!My net worth and my retirement assets are two different things. It’s not controversial, so I don’t understand why people are even discussing this aspect.
I do track both, but only use the later for investment/withdrawal decisions.
So as I said in post #11 of this thread. How folks calculate their NW is all over the map.
Surprised no one mentioned their pensions "yet", among other things.
One of these days I'll start a thread and poll (maybe) specifically to get folks opinions as to what should be included in a NW calculation.