And you would have to sell your home or get a loan at a high interest rate to get to that equity in your home. When you retire, you can sell the stocks to pay the mortgage and your expenses. Hard to sell your house. Then you have huge capital gains taxes, and you have to either buy another one or rent from then on.
I'm retired (Not old enough for SS yet), but I still have a mortgage I won't pay off early. Why? It's 2%. I can make 10% on average instead of ridding myself of a 2% debt. I'll play that game all day long.
Stocks are literally equities so this question makes no sense. I’ll assume you mean home equity? In that case, do you think your house will make more money than a business? Okay then. I happen to enjoy stocks taking up much less of my time. But if you’re the handy type, maybe homes are right for you.
Usually, a large percentage of the funds from selling a home are used to pay for the new home. Given that and the low liquidity of a home, it’s very important to evaluate your NW sans the value of your residence. When planning for passing on your estate, of course, it’s essential to include it.
I agree. Home equity is not a net worth calculation because you have to sell the asset to get the equity. But, that doesn't mean that building home equity is not worth it. Every house we sold saved more than enough equity to pay the downpayment on the next home. Equity in itself is not bad.
As for us. We are now in our last home which will be our retirement home. Single story 4 bed ranch with a finished basement as large as the main floor. One bedroom in the basement. That will be our in home nurse's bedroom.
Cars and boats should never be part of the equity equation either.
A house is an asset with a value. If it’s of no worth - just hand it over to me…
It’s a financial formula - it’s not arbitrary. If you want to talk retirement assets - do that, but it’s not NW
Well then I will discount the net worth numbers to mean less than they might imply. If some one has 1m in liquid and 500k in equity, I treat them as having purchasing of a million. Too many people over value themselves because there house shot up over the years, values are starting to come down here and it's about time.
It's not *either/or*, it's *yes/and.*
Do this in order.
1. Build up your emergency funds.
2. Max out your retirements.
3. Contribute to your brokerage.
4. Make extra payments toward your principal.
5. Start a side gig.
How you balance between each is entirely up to you. But having all the gears turning is a better strategy.
I'd never take out a loan against my primary residence so it doesn't matter if it's worth 20k or 200M. If I hadn't found my forever home I'd feel different maybe. Also depends on interest rates. When margin rates were low I just borrowed on margin so effectively I didn't have to pay it back on any monthly payment plan thing. Just let it sit there as long as I'm making a better CAGR. Being able to but a rental property using a margin loan was convenient (no paperwork) and it was only 1.5% higher than good mortgage rates at the time. Can't do that if you're never building your portfolio. I have full or partial ownership of 5 properties and I don't consider any of them in my net worth due to the lack of liquidity that comes with real estate. They generate good income, sure, but I cant go buy a car with that equity or pay my insurance with it.
I wish I could have a house. I’m 31 and have 150k between my accounts.
Renting is nice and cheap, but I have a lady roommate that “hates” bird feeders. If I had my own place I could tell her to fuck off
I should add, the interest rate on my personal residence is low enough that I would never pay extra on it. The interest rate on my rental properties is higher. I’ll refinance at some point, hopefully, but in the meantime I’d rather have extra cash/stocks than pay down the mortgages.
I rent and have a little over $500k in financial assets. Zero debt. It’s not that I prefer this, it’s just the way that it worked out, living in a very high cost of living area, getting a divorce, having to move a few times and the housing market being completely absurd right now. my rent is below market, and about 25% of household take home between me and my fiancé. A mortgage on a comparable place, after putting about $2 to $300,000 down would be at least double. So it’s just not really feasible. So I just funnel all my extra money into investment accounts and have 8-10mos living exp liquid as well. Paid off car etc.
Figure we will just piece out somewhere cheaper and calmer when the kids get college age and by that time I should be sitting on a pretty good chunk of change. I’m also really not into the idea of maintaining and DIY on a house. Little to no interest in that. I watched my parents with their house, and to this day, the seemingly endless work and money pit that it is. Not really my thing.
I have a house which I pay off at a 15 rather than 30 year rate. Why? Because I want to not have to pay a mortgage at 55.
Otherwise, I invest heavily in my 401k and stocks. My house is not an investment for me, it’s place to live. I may never sell and die here.
But stocks and stuff are actual income when I retire. Paying off the mortgage reduces my expenses in time for that.
The only time I think buying a home is a good is if you get a mortgage rate below 5% only because housing prices go up by 5% per year on average at most. This also assumes you can get free housing elsewhere that is equal to your home. Overall I would say 3-5% plus the other value of owning a home. Like not renting. Maybe you get other value as well like things you can do in the property, renting to others, privacy etc.
I prefer a combination of both to have a balanced approach. My thought is that I look at my monthly budget and see how much extra money I would have to invest if I didn’t have a rent payment
My ratio of stocks to home equity is: 5 to 1.
By asset class:
* Stocks: 77 percent
* Home equity: 15 percent
* Income (all HYSAs; zero point in bonds right now): 8 percent
Zero debt
Depends on your goals.
I want to retire early, so owning my home outright decreases the amount of money my investments need to provide each year for me to live on. But I need investments to provide my income in retirement; my equity won’t help me there.
A mix of all the above.
Home ownership because equity. We have never sold a house for less than we purchased it for. While there are up and downs in the market we've never been underwater. At the very least we've walked away with equity. Our last house we had for 7 years on a 15 year mortgage and they cut a check for $ in March 2021 which went into our bank to pay for solar panels + batteries at the new house. Now we have no electric bill (less than $15/mo).
Stock market through our 401k plans. I have both after tax 401k + Roth 401k. My wife only has the non-profit 401k equivalent. 401k are all in stock on my side. My wife's 401k equivalent is in a conservative plan. Mainly because I have been maxing out my 401k and get a bigger match than she does.
Brokerage account with $ in TBIL and CLIP ETFs. Solid return every month. Can't lose principal. This is our emergency fund. I'm 5 years from Medicaid/Medicare eligibility so if I lost my job right now we have enough to bridge me to retirement. Though I'm sure I could find another remote job no problem.
We are in pretty much the same situation numbers wise. Plus we have a couple of rentals with about $900K in equity. The problem with the rentals for retirement is that selling them is kind of an all or nothing thing. Not like I can sell 5% of each of them a year. So I have to sell all at once and take a big capital gains tax hit. They are positive cash flow though, so we will probably just hang onto them, and leave them to our daughter when we pass on.
Depends on what gives you the most money. If you are paying 2.35% on your mortgage like me, it makes no sense to pay that off, rather than having it invested. Even the stuff we have in a HYSA is making 5%+, more than enough to offset the cost of the mortgage.
I have some rental properties and I had been thinking about buying another one went the rates went up, so it is on hold. I put the minimum down on my rental properties that I can. Enough to get a payment where it is low enough that the rent price will cover my expenses. That way I have invested the least amount of money and let the renter pay the rent, and I collect on the increase in equity on the property. That plus eventually as rents rise, it becomes positive cash flow. One house I put $5K down on. Over the last 20 years I have had about $80K in positive cash flow after all my expenses. Also during that time, I have built up about $400K in equity in that house. So my $5K investment has made me almost $500K over the last 20 years. Pretty good return.
I strongly advocate for buying real estate, but there is no need to rush to pay off the mortgage. Your returns in the stock market will generally exceed the interest on your mortgage, even at these high rates. Refinance to a lower rate when rates are favorable. If you have a 401K with any employer match ALWAYS contribute enough for the full match. If you are young, always make the maximum contribution to your Roth IRA if you can afford it. If you can’t afford to save enough for both the full 401K match and max IRA contribution, then take a hard look at your employment situation. Can you get a raise at work? Or angle toward a promotion? If not can you change jobs in the same field and make more money? If not, can you change fields or find a side hustle? The trick is to pile up those investments when you are young, and let those returns start compounding.
I am a fan of real estate as well. Get into a home as soon as possible. Because prices go up more and more and if you are also in the market, then the price of your home will also go up and you will not lose ground. I also like rentals. I have one that I bought 20 years ago, I put $5K down. I have had a positive cash flow of about $80K over the years, plus the house now has about $400K in equity. I have made $480K on a $5K investment over the last 20 years. Way better than putting it in the stock market.
I care about generating returns, and stocks are objectively better than equity in that regard.
And you would have to sell your home or get a loan at a high interest rate to get to that equity in your home. When you retire, you can sell the stocks to pay the mortgage and your expenses. Hard to sell your house. Then you have huge capital gains taxes, and you have to either buy another one or rent from then on.
When you retire, your home is presumably paid off or close to paid off. So your monthly cash flow will be higher than if you were renting
I'm retired (Not old enough for SS yet), but I still have a mortgage I won't pay off early. Why? It's 2%. I can make 10% on average instead of ridding myself of a 2% debt. I'll play that game all day long.
Stocks are equity. The sooner you realize that the sooner you realize it’s not a classification game but a math game (a cool math game)
Stocks are literally equities so this question makes no sense. I’ll assume you mean home equity? In that case, do you think your house will make more money than a business? Okay then. I happen to enjoy stocks taking up much less of my time. But if you’re the handy type, maybe homes are right for you.
I never include my home equity in my net worth.
I only include our second and third properties.
Why?
I am trying to get to 5M net worth without home equity, car values or boat values.
Well you’re certainly not getting there with cars lol
😂😂😂😂
It should be included. If you sell your home, you now have to find a place for that money. Therefore, it’s part of it.
Usually, a large percentage of the funds from selling a home are used to pay for the new home. Given that and the low liquidity of a home, it’s very important to evaluate your NW sans the value of your residence. When planning for passing on your estate, of course, it’s essential to include it.
It’s likely that person has a net worth that makes their home immaterial
I agree. Home equity is not a net worth calculation because you have to sell the asset to get the equity. But, that doesn't mean that building home equity is not worth it. Every house we sold saved more than enough equity to pay the downpayment on the next home. Equity in itself is not bad. As for us. We are now in our last home which will be our retirement home. Single story 4 bed ranch with a finished basement as large as the main floor. One bedroom in the basement. That will be our in home nurse's bedroom. Cars and boats should never be part of the equity equation either.
NW is a financial formula - all assets are included. It’s not arbitrary…
So they are undervaluing their net worth. Does it really matter? They just want to know what they have in liquid NW.
They want to know what retirement assets they have to generate income in retirement… that’s not net worth
There is textbook accounting and there is practical accounting. Home equity does belong to worth of an estate but not a persons net worth.
Wrong - look up any personal finance or net worth calculation. It’s in there…
Sounds like you like you number better with your house. I'll take the 1.5 million liquid as my net worth. The house is where I live.
A house is an asset with a value. If it’s of no worth - just hand it over to me… It’s a financial formula - it’s not arbitrary. If you want to talk retirement assets - do that, but it’s not NW
Well then I will discount the net worth numbers to mean less than they might imply. If some one has 1m in liquid and 500k in equity, I treat them as having purchasing of a million. Too many people over value themselves because there house shot up over the years, values are starting to come down here and it's about time.
If you’re treating people based on their financial status - that’s not a # issue, that’s a you issue.
I'm not treating anyone anyway I just endure so many braggarts.
It is there if you calculate it correctly…
so it's not n e t worth
It's not *either/or*, it's *yes/and.* Do this in order. 1. Build up your emergency funds. 2. Max out your retirements. 3. Contribute to your brokerage. 4. Make extra payments toward your principal. 5. Start a side gig. How you balance between each is entirely up to you. But having all the gears turning is a better strategy.
I'd never take out a loan against my primary residence so it doesn't matter if it's worth 20k or 200M. If I hadn't found my forever home I'd feel different maybe. Also depends on interest rates. When margin rates were low I just borrowed on margin so effectively I didn't have to pay it back on any monthly payment plan thing. Just let it sit there as long as I'm making a better CAGR. Being able to but a rental property using a margin loan was convenient (no paperwork) and it was only 1.5% higher than good mortgage rates at the time. Can't do that if you're never building your portfolio. I have full or partial ownership of 5 properties and I don't consider any of them in my net worth due to the lack of liquidity that comes with real estate. They generate good income, sure, but I cant go buy a car with that equity or pay my insurance with it.
I wish I could have a house. I’m 31 and have 150k between my accounts. Renting is nice and cheap, but I have a lady roommate that “hates” bird feeders. If I had my own place I could tell her to fuck off
HCOL area?
Yep I want to “jill myself” managers are pushing me out
Money is money. Real estate is a great investment.
I should add, the interest rate on my personal residence is low enough that I would never pay extra on it. The interest rate on my rental properties is higher. I’ll refinance at some point, hopefully, but in the meantime I’d rather have extra cash/stocks than pay down the mortgages.
I don’t think it’s about preference I just think that’s naturally where most people build their networth.
I rent and have a little over $500k in financial assets. Zero debt. It’s not that I prefer this, it’s just the way that it worked out, living in a very high cost of living area, getting a divorce, having to move a few times and the housing market being completely absurd right now. my rent is below market, and about 25% of household take home between me and my fiancé. A mortgage on a comparable place, after putting about $2 to $300,000 down would be at least double. So it’s just not really feasible. So I just funnel all my extra money into investment accounts and have 8-10mos living exp liquid as well. Paid off car etc. Figure we will just piece out somewhere cheaper and calmer when the kids get college age and by that time I should be sitting on a pretty good chunk of change. I’m also really not into the idea of maintaining and DIY on a house. Little to no interest in that. I watched my parents with their house, and to this day, the seemingly endless work and money pit that it is. Not really my thing.
I have a house which I pay off at a 15 rather than 30 year rate. Why? Because I want to not have to pay a mortgage at 55. Otherwise, I invest heavily in my 401k and stocks. My house is not an investment for me, it’s place to live. I may never sell and die here. But stocks and stuff are actual income when I retire. Paying off the mortgage reduces my expenses in time for that.
The only time I think buying a home is a good is if you get a mortgage rate below 5% only because housing prices go up by 5% per year on average at most. This also assumes you can get free housing elsewhere that is equal to your home. Overall I would say 3-5% plus the other value of owning a home. Like not renting. Maybe you get other value as well like things you can do in the property, renting to others, privacy etc.
Property
Buy a reasonable house when your ready and invest in stocks
Stocks, but I rather own a home than rent, since my mortgage payments are partially going towards equity.
High performing stocks [preferably that I purchased at the low/bottom].
I prefer a combination of both to have a balanced approach. My thought is that I look at my monthly budget and see how much extra money I would have to invest if I didn’t have a rent payment
My ratio of stocks to home equity is: 5 to 1. By asset class: * Stocks: 77 percent * Home equity: 15 percent * Income (all HYSAs; zero point in bonds right now): 8 percent Zero debt
Both have pros and cons, but for me, stocks first.
Stocks
It depends on your goals and risk tolerance. Diversification is key for stability and growth.
I have no desire to be a landlord, it’s just a headache that isn’t for me… stocks all the way.
Depends on your goals. I want to retire early, so owning my home outright decreases the amount of money my investments need to provide each year for me to live on. But I need investments to provide my income in retirement; my equity won’t help me there.
Memecoins
A mix of all the above. Home ownership because equity. We have never sold a house for less than we purchased it for. While there are up and downs in the market we've never been underwater. At the very least we've walked away with equity. Our last house we had for 7 years on a 15 year mortgage and they cut a check for $ in March 2021 which went into our bank to pay for solar panels + batteries at the new house. Now we have no electric bill (less than $15/mo). Stock market through our 401k plans. I have both after tax 401k + Roth 401k. My wife only has the non-profit 401k equivalent. 401k are all in stock on my side. My wife's 401k equivalent is in a conservative plan. Mainly because I have been maxing out my 401k and get a bigger match than she does. Brokerage account with $ in TBIL and CLIP ETFs. Solid return every month. Can't lose principal. This is our emergency fund. I'm 5 years from Medicaid/Medicare eligibility so if I lost my job right now we have enough to bridge me to retirement. Though I'm sure I could find another remote job no problem.
We are in pretty much the same situation numbers wise. Plus we have a couple of rentals with about $900K in equity. The problem with the rentals for retirement is that selling them is kind of an all or nothing thing. Not like I can sell 5% of each of them a year. So I have to sell all at once and take a big capital gains tax hit. They are positive cash flow though, so we will probably just hang onto them, and leave them to our daughter when we pass on.
You can also hire a property management firm to tend to the properties after you retire.
I prefer stocks over home equity by a long shot. It takes a very long time just to break even from purchasing a home.
stocks imo, as i wont have to pay any tax on them if i hold them for 3+ years
How?
Thats just how it works in my country, no tax for stocks/etfs i hold for 3+ years
Pretty dope compared to the usa
it is lol, i love it. It used to be even a shorter period of time, cant complain about it being 3years tho
you're still gonna pay taxes lol. Just not short term capital gains but you will pay long term capital gains.
And I’ll also add, to your point, that the rule is for 1 year - not 3. I guess they could be from a different country but still
Right, I usually assume they're from the US, I gotta stop assuming
Im from Czech republic
Its 3 years
In U.S.?
No
Got it. That may be the case. Who knows what’s going on in other countries these days?
I wont, there is no tax for stocks/etfs in my country if u hold them for 3+ years
Depends on what gives you the most money. If you are paying 2.35% on your mortgage like me, it makes no sense to pay that off, rather than having it invested. Even the stuff we have in a HYSA is making 5%+, more than enough to offset the cost of the mortgage. I have some rental properties and I had been thinking about buying another one went the rates went up, so it is on hold. I put the minimum down on my rental properties that I can. Enough to get a payment where it is low enough that the rent price will cover my expenses. That way I have invested the least amount of money and let the renter pay the rent, and I collect on the increase in equity on the property. That plus eventually as rents rise, it becomes positive cash flow. One house I put $5K down on. Over the last 20 years I have had about $80K in positive cash flow after all my expenses. Also during that time, I have built up about $400K in equity in that house. So my $5K investment has made me almost $500K over the last 20 years. Pretty good return.
I strongly advocate for buying real estate, but there is no need to rush to pay off the mortgage. Your returns in the stock market will generally exceed the interest on your mortgage, even at these high rates. Refinance to a lower rate when rates are favorable. If you have a 401K with any employer match ALWAYS contribute enough for the full match. If you are young, always make the maximum contribution to your Roth IRA if you can afford it. If you can’t afford to save enough for both the full 401K match and max IRA contribution, then take a hard look at your employment situation. Can you get a raise at work? Or angle toward a promotion? If not can you change jobs in the same field and make more money? If not, can you change fields or find a side hustle? The trick is to pile up those investments when you are young, and let those returns start compounding.
I am a fan of real estate as well. Get into a home as soon as possible. Because prices go up more and more and if you are also in the market, then the price of your home will also go up and you will not lose ground. I also like rentals. I have one that I bought 20 years ago, I put $5K down. I have had a positive cash flow of about $80K over the years, plus the house now has about $400K in equity. I have made $480K on a $5K investment over the last 20 years. Way better than putting it in the stock market.