Author Topic: Do you include your house in your FIRE stash?  (Read 4938 times)

JoyBlogette

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Do you include your house in your FIRE stash?
« on: August 13, 2014, 12:52:00 PM »
I estimate our FIRE number to be about $800k.  We are close to that with a Net Worth of $700k, but this includes the value of our primary residence.  I was originally excluding the house value from my FIRE number (which puts us at closer to $300 NW towards FIRE).  So my questions are:
1. Do you include your home value in your FIRE numbers? 
2. We plan to downsize to a less expensive house in retirement.  Would you include that in your FIRE numbers somehow?

tyd450

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Re: Do you include your house in your FIRE stash?
« Reply #1 on: August 13, 2014, 12:55:26 PM »
Our plans are to downsize/move to lower COL once we FIRE but I am not counting that in my stash because I could easily see us changing our minds and deciding to stay put once that time actually comes around (10 years from now).  If anything I am counting on that as being a nice buffer to the stash.

Fishingmn

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Re: Do you include your house in your FIRE stash?
« Reply #2 on: August 13, 2014, 02:08:12 PM »
Nope.

I count the expenses of owning the house but the house isn't producing income so all of my financial calculations are done with just the assets I own that will sustain my expenses.

Beric01

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Re: Do you include your house in your FIRE stash?
« Reply #3 on: August 13, 2014, 02:27:18 PM »
Nope.

I count the expenses of owning the house but the house isn't producing income so all of my financial calculations are done with just the assets I own that will sustain my expenses.

Precisely this.

A home value roughly tracks that of inflation. While it may (or may not) reduce your expenses in your retirement, it produces no income of itself unless you're renting out rooms or something. Rules such as the 4% withdrawal rate don't apply.

Cassie

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Re: Do you include your house in your FIRE stash?
« Reply #4 on: August 13, 2014, 02:42:59 PM »
WE don't count it either as we would have to sell to get the $ and then have to pay to live somewhere.  But if you know your house is worth $400K and you have 200k equity and plan to move to a place that only costs 100k then technically you could count that 100k you would have left after selling. 

Thegoblinchief

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Re: Do you include your house in your FIRE stash?
« Reply #5 on: August 13, 2014, 02:46:37 PM »
WE don't count it either as we would have to sell to get the $ and then have to pay to live somewhere.  But if you know your house is worth $400K and you have 200k equity and plan to move to a place that only costs 100k then technically you could count that 100k you would have left after selling.

+1

Surplus equity from downsizing or moving to lower COL would be the only reason to include it in your NW/FIRE calculations.

Mr Mark

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Re: Do you include your house in your FIRE stash?
« Reply #6 on: August 13, 2014, 03:47:41 PM »
Its all about cash flow.

The house you own would cost you rent if you didnt own it. Instead you pay taxes, garbage, etc. And maybe a mortgage.

So, it lowers the cash needed in the rest of the stash. A little. In most places its a better option to buy if youll be there a while. Use ARS's calculator, tyen add non econ terms like how much you're willing to pay for luxuries like no lease, lower stress, etc.

So the question is: how do I pay for somewhere to live in FIRE? Rent? Own and just pay expeses? Own and have a mortgage? Travel the world using cruiseships and priceline/airbnb? Buy or rent a truly mobile home?


G-dog

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Re: Do you include your house in your FIRE stash?
« Reply #7 on: August 13, 2014, 08:04:15 PM »
I don't because I only consider it semi-liquid - the time frame to sell could be long, depending on the market. Others up thread have more financially savvy sounding reasoning. ;)

Sdsailing

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Re: Do you include your house in your FIRE stash?
« Reply #8 on: August 13, 2014, 09:24:58 PM »

At most it would make sense to include the difference between current house and downsized house.

If the primary point is to determine the amount of annual income based on a fixed SWR, then the answer is unambiguous.

Snow White

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Re: Do you include your house in your FIRE stash?
« Reply #9 on: August 13, 2014, 09:41:40 PM »
No.  The house is paid for and has a value of between $250,000- $275,000.  We count $200,000 in our net worth as that is what we paid for it but don't consider it for FI.  We have to live somewhere and I'd rather err on the side of undervaluing assets than overvaluing. 

If the proverbial shit hit the fan, the house could be sold and that cash freed up but I don't want to consider that in my calculations.

fixer-upper

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Re: Do you include your house in your FIRE stash?
« Reply #10 on: August 13, 2014, 11:16:59 PM »
Absolutely.  I treat my house as its own business, and charge myself rent. In my case, the business does quite well (>15% tax free annual ROI) because I bought a cheap foreclosure with cash and fixed it up myself.

Failing to think of a house as a business venture leads to stupid decisions.

former player

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Re: Do you include your house in your FIRE stash?
« Reply #11 on: August 14, 2014, 02:34:15 AM »
If you own a house without a mortgage, then that reduces your living expenses, which means that you need a smaller stash than you would if you had to pay rent or a mortgage in retirement.  So the house you own counts that way.

If you are downsizing after retirement to a place on which you will have no rent or mortgage and are freeing up cash at the same time, then there may be smaller living expenses that your stash has to cover (tax, bills, repairs) plus there is extra cash for the stash.

So one way or the other, the value of your house does count in the stash.  The thing to avoid doing is counting it twice, or counting the value that you are currently living in which is over its "spare cash if we downsized" value.

iamadummy

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Re: Do you include your house in your FIRE stash?
« Reply #12 on: August 14, 2014, 07:40:00 AM »
No.  Most people don't end up moving anyways