Author Topic: primary residence as percentage of total net worth?  (Read 853 times)

evme

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primary residence as percentage of total net worth?
« on: January 14, 2019, 12:49:35 AM »
Just curious -- what percentage of your net worth are you comfortable having allocated towards your primary residence? I'm especially interested in people who are already FIRE or close to FIRE.

Freedomin5

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Re: primary residence as percentage of total net worth?
« Reply #1 on: January 14, 2019, 02:41:15 AM »
Your primary residence doesnít count towards your FIRE number, so the question is irrelevant. If I need to generate $30k income, I need $750k in my investments excluding primary residence. It doesnít matter if I live in a $10 million dollar luxury tiny house (primary residence is 93% of net worth) or if I live in a $100k basic tiny house (11.76% of net worth). As long as I have my $750k in investments generating its $30k income, Iím good.

matchewed

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Re: primary residence as percentage of total net worth?
« Reply #2 on: January 14, 2019, 05:04:28 AM »
Like Freedomin5 said it doesn't matter really unless you are choosing to sell your primary residence.

Malkynn

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Re: primary residence as percentage of total net worth?
« Reply #3 on: January 14, 2019, 05:17:18 AM »
Agreed.

Primary residence doesn't matter unless you plan to sell and buy/rent much cheaper.

Otherwise, what does it matter what percentage it is if you otherwise have enough saved to cover expenses? It would have absolutely no impact.

Linea_Norway

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Re: primary residence as percentage of total net worth?
« Reply #4 on: January 14, 2019, 05:27:01 AM »
We have calculated our net worth as all our money and stocks, after downsizing to a smaller house, which will leave us  50% of the price of our current house. But I do calculate that we then will be living in a cheaper house without any mortgage.
The first year of FIRE (hopefully starting this year) will be a bit different, because we want to rent somewhere first. But we will put the money for the future house somewhere safe, maybe on bank accounts.

ericrugiero

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Re: primary residence as percentage of total net worth?
« Reply #5 on: January 16, 2019, 08:52:28 AM »
I don't know that there is a certain % that I'm comfortable with or uncomfortable with.  It's more about optimizing for your circumstances.  Currently, our house is worth about 28% of our net worth.  However, we live in an area with very reasonable housing costs and are still a good way from FI. 

With current housing costs, expenses, etc I would be looking at about 10% of net worth before I considered myself ready to FIRE.  In a market with higher real estate values that number would probably be higher. 

waltworks

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Re: primary residence as percentage of total net worth?
« Reply #6 on: January 16, 2019, 12:53:47 PM »
Housing for you/your family, whether you rent or own, is just an expense. Don't consider it at all for FIRE calculations (except as an expense) unless you're house-hacking or have a specific plan to downsize/move from HCOL to LCOL area.

-W

Fishindude

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Re: primary residence as percentage of total net worth?
« Reply #7 on: January 17, 2019, 10:27:58 AM »
Kind of gloomy to think about but at some point a large percentage of us will have to give up the house and wind up in some type of care facility.  Maybe just for a few months, maybe for a few years, and they are expensive.   It's not uncommon for the house to be about all a senior has left at the end of life, so having valuable real estate vs minimal could make the difference between quality end of life care or not.   

Freedomin5

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Re: primary residence as percentage of total net worth?
« Reply #8 on: January 20, 2019, 06:29:53 AM »
Kind of gloomy to think about but at some point a large percentage of us will have to give up the house and wind up in some type of care facility.  Maybe just for a few months, maybe for a few years, and they are expensive.   It's not uncommon for the house to be about all a senior has left at the end of life, so having valuable real estate vs minimal could make the difference between quality end of life care or not.

Or you could just buy long-term care insurance.

In our area, a good nursing care facility can cost upwards of $5000/month. So if you have a stash that generates at least that amount in perpetuity, you shouldn't have a problem. Your house does not necessarily need to factor into the calculations.

rab-bit

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Re: primary residence as percentage of total net worth?
« Reply #9 on: January 20, 2019, 07:51:47 AM »
Ours is about 18% right now but we are planning on downsizing as we begin retirement which would allow us to pay off a rental property and reduce it to around 12%.

Car Jack

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Re: primary residence as percentage of total net worth?
« Reply #10 on: January 20, 2019, 03:30:23 PM »
Ours is about 18%, but we're not done accumulating.  I'll move from our house after someone cuts my arm off of the hand that's holding onto the door as they are trying to cart me away.  Mortgage has been paid for a decade and a half.  Goal is 50X spending in liquid, spendable assets before I call it quits at work.  Or the kids all are launched.

waltworks

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Re: primary residence as percentage of total net worth?
« Reply #11 on: January 20, 2019, 03:36:32 PM »
Ours is about 18%, but we're not done accumulating.  I'll move from our house after someone cuts my arm off of the hand that's holding onto the door as they are trying to cart me away.  Mortgage has been paid for a decade and a half.  Goal is 50X spending in liquid, spendable assets before I call it quits at work.  Or the kids all are launched.

Off topic, but... 2% rule?!? Wow. I hope you enjoy your job.

-W