How do you factor your home into your net worth?

[alewpanda]

Maybe this is my "noob" showing, but how do you factor your home (as in, your residence) into your net worth?

Do you estimate its value in your current market, or have you actually had it appraised?

Do you only consider the equity you have in the home as a part of your net worth? 


Honestly, we didn't purchase our home with any "investment" in mind.... We got it at a good price, its an ok size for marketability, and we have probably added a little bit of value to it with new roofing, furnace, ect.
The issue is that the market isn't fantastic here, and likely will never be great (smaller, rural area).  So in my mind, I hate to even 'depend' on getting anything more than our money back on the house...at least if we were to sell anytime in the next 5ish years.  Which is plausible, but not 'in the plans' per se.

  So what do I do with it when I figure up NW?  Or, since we are talking FIRE plans, do you factor it into FIRE a little differently than the simple math of debts vs. assets? 

[slugline]

Feel free to use whatever estimated valuation you're comfortable with. You won't know what the house is really worth until you sell it. (To be honest, the same applies for stocks, bonds and any other assets.)

You've read MMM's blog posts discussing the 4% Rule, right? Unless you're intending to sell the home at retirement, the value of the house isn't part of "The Stash." (Houses don't spin off interest or dividends.) However, owning your home should reduce your housing costs, so you've got that working for you.

[KBecks]

We plan to stay in this house for a long time, so the value of the house isn't that important.  It is a solid house in a solid area and it will re-sell whenever we need to.  Some parts of the house are a little dated and some things need cosmetic maintenance, but overall, it's a solid house in a nice area.

Our home has gone up in value, for sure, we've been here a long time.  Recently a few houses around us sold.  Our home has one more bedroom so I am guesstimating our house at $25k or $30k more than the homes with one less bedroom.

Zillow estimates our home higher but I don't think we'd get as high as what Zillow says.  If we were going to sell, I would absolutely talk to realtors to work on a real selling price, but we don't need that.

Our equity (guesstimate value - remaining mortgage) is a part of our net worth.  It of course is not part of our assets that would produce FIRE income.   When we pay off our house, our expenses go down considerably.

Hope that helps!

[alewpanda]

Feel free to use whatever estimated valuation you're comfortable with. You won't know what the house is really worth until you sell it. (To be honest, the same applies for stocks, bonds and any other assets.)

You've read MMM's blog posts discussing the 4% Rule, right? Unless you're intending to sell the home at retirement, the value of the house isn't part of "The Stash." (Houses don't spin off interest or dividends.) However, owning your home should reduce your housing costs, so you've got that working for you.

Yes, I have read about the 4% rule.  And while I don't necessarily think we will stay in this home indefinably, I certainly don't want to count on it for FIRE income or for money for the stash...  I guess that is kind of the concern  I was trying to put into words -- whether or not to count it in "the stash", because it seemed as though many do factor in their home value. 

I do try to keep resale in mind a bit though -- particularly when deciding on upgrades/additions.  I won't get any money out of fancy upgrades in this area or neighborhood, and since we don't consider it a "forever" home or even a FIRE home, we keep it well maintained, but not to our "dream" level...lol.  It is inexpensive to live in compared to other homes...so that helps out the stash, and it wouldn't be hard to pay off and live in inexpensively if we did FIRE here I guess......

[alewpanda]

We plan to stay in this house for a long time, so the value of the house isn't that important.  It is a solid house in a solid area and it will re-sell whenever we need to.  Some parts of the house are a little dated and some things need cosmetic maintenance, but overall, it's a solid house in a nice area.

Our home has gone up in value, for sure, we've been here a long time.  Recently a few houses around us sold.  Our home has one more bedroom so I am guesstimating our house at $25k or $30k more than the homes with one less bedroom.

Zillow estimates our home higher but I don't think we'd get as high as what Zillow says.  If we were going to sell, I would absolutely talk to realtors to work on a real selling price, but we don't need that.

Our equity (guesstimate value - remaining mortgage) is a part of our net worth.  It of course is not part of our assets that would produce FIRE income.   When we pay off our house, our expenses go down considerably.

Hope that helps!

It does!  Thank you for your response!  Our home was inexpensive to start with, and isn't too big or too small.  So if we did decide to FIRE here, it would be easy to pay off and that would provide a lot of budget buffer.  :)

[Grogounet]

Agree with slugline. The whole reason for net-worth is to use as THE basis for your retirement income.
Unless you're going to use some fancy/creative ideas (Subdivise, rent a room, reverse mortgage, etc...), I wouldn't count it.

Even if you plan to resell, it's only part of your net-worth if you downgrade or buy somewhere cheaper. You will always need a roof above your head.

[Primm]

I don't count the value of my home. I need to live somewhere, and I consider that a paid-off home in retirement contributes to expense cutting, but the equity is something my children will benefit from, not myself.

[Davids]

I do include the equity in my home as part of my overall net worth. Now what I don't do that others do is include the value of my car. That I don't think should be included (unless it is a collector classic car)

[Spork]

Do I include my home in my net worth?  Yes.  Absolutely.

Do I use net worth for FIRE calculations?  NO.

Net worth is exactly that.  It is the sum of your worth.  It's maybe fun to know.  It gives you a data point to track.  It shows you progress over time.  It is a number you can pass on to children/charity.  But it is likely not something that means much for retirement.

If, for example, you live in an expensive house in a high cost of living area... and your fire plans are to move to a tiny cabin in a low cost of living area... then some portion of your home's worth might make sense.

What I would suggest is to track net worth AND track some number that makes sense for FIRE. 
* In my case that number is, to make up a phrase, "liquid net worth".  It includes just financial assets.
* The guy moving from HCOL to LCOL might include his home equity (but only the equity)
* Someone that has a really good pension plan might include a present day value of their pension

[ender]

Appraised value * 0.94

We might change it some in the future as we relatively recently bought it, so we know the exact appraisal value. But this works well enough, it better reflects the actual economic impact of the house - if it's worth $100k, you can't sell it for $100,000 and not have a single transaction cost regardless of whether you don't use a realtor or not.

[undercover]

The value of your home is only material if you're going to sell...if you don't plan on selling within a few years, why even worry about it all? No one's going to come up to you and ask you the value of your home. Thus, there's no reason to even consider its value at all.

Technically, yes, it's part of your "net worth" (only the equity portion). Realistically, it's an ongoing expense that should be cheaper than renting in the long term. The equity is completely useless unless you're going to sell (and a HELOC is unrelated since it's a loan and not an investment).

[10dollarsatatime]

I value it at what zillow tells me.  It was pretty close when I refinanced about 6 months ago, so I think it's ok.  I know some people don't figure the house into their net worth at all, but it's part of the reason I managed to get over 6 figures this year, so I'm keeping it. This just means that I can count 100,000 twice, once with all assets, and once with liquid assets. ;)

[LeRainDrop]

Do I include my home in my net worth?  Yes.  Absolutely.

Do I use net worth for FIRE calculations?  NO.

I agree with Spork.

For tracking net worth specifically, I include both the principal value of my mortgage AND the market value of my home at the time I purchased it.  I don't add in any appreciation, even though zillow, etc. tell me that the value of my home has increased significantly.

For planning for FIRE, I don't count the value of my home at all.

[gggggg]

I consider it an alternative investment on my balance sheet, just like if I had bought some rental real estate or a piece of land, REIT, precious metals, so on.

[oldtoyota]

In my NW spreadsheet, I have a total line for FIRE money and another total line for FIRE money + house.

I don't plan to live off of the equity from the house, so I don't include it in my FIRE number.

[FIRE me]

I conservatively estimate the value of my paid for house for net worth purposes, but since I won't sell it when I FIRE, I don't include it as an investment in my FIRE safe withdraw rate calculations.

[mwulff]

I don't include it my net worth calculation. I do however budget for upkeep and maintenance in our FIRE scenario. But since we plan to keep the house (once we get it paid off) it's value has no direct influence on our stash.

We could however take out a nice big loan against the equity in the future (think in our 80's) and just "eat our bricks" for a few years. We don't plan on leaving any money behind.

[faramund]

I use a HELOC to take equity out of my house to buy shares, and somewhat hence, I have a few valuations for my house: what I paid for it, what the bank appraised my house at a few years ago, and a very recent appraisal by them.

Where I am (in Australia) its pretty easy to find on the web the median value of a house in any suburb. So I can link up how my house has changed in value, by taking the original point, and multiplying it by the average increase of a house in my suburb - to the later points. It seems to work fairly well.

I don't use the net value of my house to work out retirement, but I do use the future net value of the additional shares I can buy (based on my assumptions of how my house and those shares will increase in value), when I project forward to work out when I can retire.

[Fishindude]

Net worth = The total assets minus total outside liabilities of an individual or company.
If you are truly calculating your net worth, the value of your home (or the equity in your home if still have a loan), is absolutely part of your net worth. 

If you never intend to sell the home and don't want to count it's value in your retirement calculations, that's a whole different matter.

[MrsDinero]

As a family, we do add the house as part of our overall net worth.

When we are looking at what we need to FIRE, we do not include the house, because we plan to live here for a very long time.

[jim555]

I estimate the market price based on recent sales for similar units.  I then discount it a bit for sales expenses.  Home equity is defiantly included in net worth.

[Villanelle]

I don't use it when looking at FIRE or our "stache".  And I don't calculate net worth at all because it's really a meaningless number to me. What I'd have if I sold everything I own is not a valuable piece of information (to me) because I have no intention of ever doing that.  And for FIRE, I don't know where we will live (either location or house) so I have no idea if we'll be taking any of the equity out of our current house to use toward living expenses.  Actually, it's a rental now because we live overseas, but I still don't count the value of it (for FIRE calculations), because when we move back to the States will will need somewhere to live.  We may sell it to purchase something else, keep it and purchase something else (at which point I would start counting the equity toward FIRE because it would be a second property), or keep it and rent.