Author Topic: Primary residence as a percentage of assets  (Read 5559 times)

AlmstRtrd

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Primary residence as a percentage of assets
« on: April 05, 2014, 11:38:43 AM »
If I am rehashing an old subject, please point me to the correct thread...

Does anyone have thoughts on what percentage of one's assets a primary residence should make up in retirement? I guess the obvious answer is "it depends" but I am curious what most folks are planning on. When we retire in another few years, my wife and I should have enough assets outside of our home to keep us going at a 3-4% SWR. My basic thought is that our house would be the last thing we would sell before we check into a facility where we can be taken care of (thankfully still many years away). Rather than planning a stutter step approach where we keep downsizing to accommodate our shrinking need for space, I'd rather just live in one place that suits our needs for the next couple of decades.

I realize that without giving all my data this is not a really specific question, but hopefully I am not the only one who finds it an interesting thought exercise. Thanks in advance for any input.

Gin1984

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Re: Primary residence as a percentage of assets
« Reply #1 on: April 05, 2014, 01:03:08 PM »
I don't consider the home as part of my asset calculations.

Badass by 41

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Re: Primary residence as a percentage of assets
« Reply #2 on: April 05, 2014, 02:22:39 PM »
When we were homeowners, we definitely counted the house as part of our Net Worth, though how much of a true "asset" it is probably depends on how leveraged you are with a mortgage, and current market conditions.  Until we were confident, based on comps, that we were in the money on a sale, we didn't considered our home a liability/debt.

We're renting now, but plan on buying again when we FIRE.  At that point, our plan is to consider the house part/all of our REIT allocation and rebalance our AA accordingly.  That said, whether we consider the home an asset will depend on what we pay, the mortgage we get, and market conditions.

2527

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Re: Primary residence as a percentage of assets
« Reply #3 on: April 05, 2014, 02:30:13 PM »
FWIW, our equity in our house is about 5% of our total net worth.  If the house were completely paid for (right now it is about 2/3 mortgaged), house equity would be about 15% of our total net worth. 

ToughMother

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Re: Primary residence as a percentage of assets
« Reply #4 on: April 05, 2014, 02:37:25 PM »
Our house equity is currently 9% of our NW. 

As for what it should be in retirement, I can't say I think about it that way.  Either it will be paid off and our annual expenses will be less requiring less overall savings to retire, or it won't be entirely paid off and we'll need a bit more in savings to cover somewhat higher annual expenses...

Cassie

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Re: Primary residence as a percentage of assets
« Reply #5 on: April 05, 2014, 02:42:44 PM »
paid off so an asset. The only way we would sell is if we got so old that living in a small condo seemed desirable.  Then we would buy one & pocket the difference. 

Exflyboy

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Re: Primary residence as a percentage of assets
« Reply #6 on: April 05, 2014, 04:27:18 PM »
About 23% for us.. Paid for and already FIREd

Frank

Emilyngh

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Re: Primary residence as a percentage of assets
« Reply #7 on: April 05, 2014, 04:52:53 PM »
Our equity is currently about 25% of our NW.   When FI, if living in the same house and it's paid off, it should still be around 25% of our NW.   However, in theory, I would like to downsize before then to a less expensive house and have it be closer to 15% of our NW or so.

deborah

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Re: Primary residence as a percentage of assets
« Reply #8 on: April 05, 2014, 05:24:16 PM »
I think it depends on where you live. Here in Australia, homes are more than 2.5 times real worth than in US, so they make up a greater percentage of net worth than elsewhere (if you want to know the averages per country see the Economist http://www.economist.com/blogs/dailychart/2011/11/global-house-prices). Since reading this forum I have been amazed by how cheap US houses are. I consider that it's reasonable to have a primary house as 50% assets here with a mustachian retirement.

This is one reason I am not in the property investment market. Houses are expensive, rents are comparatively cheap (there are only a couple of suburbs in each state where renting is more expensive than buying), and we have been told for many years that we have a housing bubble that is going to burst. Interest rates and shares also return a lot more than in the US, as we had a very minor GFC.


AlmstRtrd

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Re: Primary residence as a percentage of assets
« Reply #9 on: April 06, 2014, 10:00:11 AM »
Quote
I think it depends on where you live. Here in Australia, homes are more than 2.5 times real worth than in US, so they make up a greater percentage of net worth than elsewhere (if you want to know the averages per country see the Economist http://www.economist.com/blogs/dailychart/2011/11/global-house-prices). Since reading this forum I have been amazed by how cheap US houses are. I consider that it's reasonable to have a primary house as 50% assets here with a mustachian retirement.

Thanks for posting that, Deborah. VERY interesting to compare housing cost trends by country.

My general thought in starting this thread is that it seems like it doesn't make sense to have a huge percentage of your net worth tied up in your home if that is forcing you to live overly frugally. This obviously varies from person to person as some folks would rather give up day-to-day luxuries in exchange for living in a certain area or certain size house. I guess my feeling is that I'd rather live in a house that is only 10-15% of our net worth and not have to cut as many corners elsewhere. To each his own obviously, but I am just curious how central this idea is to a frugal lifestyle for most folks.

Thank you all for your responses.