Comments on: Your home’s value and your net worth

By: threadbndr

threadbndr — Tue, 24 Jul 2007 19:45:21 +0000

I run my numbers both ways – with a (conservative) estimate of house value less mortgage balance when I had one (classic net worth) and without the primary residence (liquid net worth).

I actually cut my net worth a THIRD way – without house OR retirement (investment net worth aka the ‘go the &*!! fund’)

I think that tracking all three indicators plus cash flow over time gives you a pretty good handle on if you are trending in the right direction.

By: Michael

Michael — Tue, 24 Jul 2007 19:07:27 +0000

I have my net worth sheet broken down into four areas:
–Property – So, obviously, I do calculate my home equity. One thing to make sure is to subtract out expected selling costs of your house, as well as your mortgage payoff. I just sold a condo and so I can say that you should expect about 7-8% off the selling price to go to agents, transfer fees, home warranties, title insurance, etc. So, on the flip side, when you buy a house, know that it has to go up about 10% in order for you to even break even on it.
–Cars – Same deal, I calculate the current Kelly Blue Book price less any outstanding loan balance. I do this because I don’t want my cars to represent a large part of my total net worth since it’s a depreciating asset. I actually have gotten much more frugal with cars and kept cars a lot longer than I did before I started this tracking.
–Current Assets – Bank accounts, money markets, mutual funds, etc. Anything that I could easily turn into cash
–Retirement Assets – 401ks, IRAs, etc.

Adding these four categories together provides me an overall net worth summary, but by breaking it out, I can see how I’m doing in each area, and also track what percentage of net worth is allocated to each category.

By: mbhunter

mbhunter — Mon, 23 Jul 2007 04:10:00 +0000

TraineeInvestor: Maybe “earn” wasn’t quite the right word. Perhaps “deserve” is a better word. I suppose if I decided to get out of real estate completely and rent for a while, then when I sell, I will have earned that increase. Bottom line is I don’t feel any richer because of the increase in my home’s value.

Lazy Man: Yes it’s a little strange but it’s exactly what to do, because your home is now an income-producing asset.

By: Free Money Finance

Free Money Finance — Fri, 20 Jul 2007 10:20:24 +0000

Star Money Articles for the Week of July 16…

Here are some recent interesting posts from the MoneyBlogNetwork and beyond: MightyBargainHunter talks about your home’s value and your net worth. Five Cent Nickel gives his historical net worth numbers. Blueprint for Financial Prosperity thinks debt …

By: used vans girl

used vans girl — Thu, 19 Jul 2007 09:02:49 +0000

I own a property(mortgaged) but have never considered it to be part of my net value. Its something that we wouldn’t sell unless in an absolute emergency otherwise we would have no where to live. So although our house value may be rising with house prices I wouldn’t consider myself to be richer as everything else has increased in price also. When we bought our house which is 3 bedroom, to buy a house in the same street with an extra room would have cost us an extra 10-20,000 now we would be looking more like having to spend 50,70,000 for the same house. So I would say if you bring property into the equation unless its a second property bought solely for investment purposed Property certainly doesn’t make you richer.

By: Lord

Lord — Wed, 18 Jul 2007 21:43:53 +0000

As an asset I carry it at historical book value, but track the market value separately as part of net worth, but don’t consider myself any wealthier because it’s value increased. Any other place I buy would cost at least as much and any appreciation can’t be spent without consequences. While it raises my taxes, it does not provide a nicer place to live, so I consider it counterbalanced by an increase in rental equivalent.

By: Lazy Man and Money

Lazy Man and Money — Wed, 18 Jul 2007 19:49:15 +0000

I do my net worth in several ways. For the purpose of publishing on my site, I include the house. As I no longer live in it and rent it out, it’s transformed from my home to an investment property. It seems silly to suddenly add it due to that transition as I didn’t end up buying or selling, gaining or losing anything. Nickel also mentioned in his article that he’s looking to expand the home. That will incur a cost and if he doesn’t “realize” the gain of the asset will look like he just took a big vacation or blew his money on women and booze .

So I have separate items for real estate and possessions (cars, furniture, etc.). I know exactly how wealthy I am across the board.

By: Gaming the Credit System

Gaming the Credit System — Wed, 18 Jul 2007 18:29:58 +0000

I usually consider what one might call my Liquid Net Worth. This does not include *any* non-liquid assets (car, personal property, real estate; or any loans collateralized by such assets, *unless* the loan amount is more than the amount of the asset) in my day-to-day net worth. Yes, sometimes it might be fun to add up all of my belongings and try to determine the “pie in the sky” net worth, but for the most part I don’t see the use.

By: Kurt

Kurt — Wed, 18 Jul 2007 16:36:08 +0000

“To begin with, as I understand it, your net worth would actually plummet down to nearly four times the cost of the house with a standard 30 year fixed rate mortgage, taking into account the total amount including interest you own on the house.”

You don’t understand it correctly. You don’t include the future interest expense in the current value for two reasons: you can pay off the loan immediately and not pay that interest and (more importantly) if you were to do this with the other side of the balance sheet (assets), you would show billion and billions of dollars of interest from just a simple checking account. Yes, the dollar figure you pay in interest is high, but it’s not a liability today.

By: KMC

KMC — Wed, 18 Jul 2007 12:56:26 +0000

That’s an interesting take on why you shouldn’t include home equity in net worth – the wealth effect. However, I think that anyone who truly takes the time to calculate their net worth probably isn’t going to fall for that (but I could very well be wrong). On the other hand, people evidently feel the wealth effect even if they only get the ‘feeling’ they’re asset has appreciated. Though most Americans don’t own stocks and barely a majority own homes, economists attribute growth all the time to ‘wealth effect.’

For what it’s worth, I calculate our net worth both ways, just for the perspective.