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Net worth

lord of pensions and pilsner wrote:

I chose the right parents – I got my wealth from them

I bet that’s right.  

82 > 87
Simple math.

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nothing wrong with that.  I’d rather be “I got my wealth from my parents and live in a $30mm condo in 15CPW” than say “yeah I had to do it all by myself and used to live in a closet in a “pre-war” building with no elevator on the 11th floor with 4 roommates for 7 years but now I made it so now…i live in a 1200 sq ft apartment in NYC on Canal St that I got for $3mm.

Be yourself. The world worships the original.

No, there’s nothing wrong with it.  I just want you to admit that you’re wealthy through absolutely no merit of your own.  

82 > 87
Simple math.

lord of pensions and pilsner wrote:

cj4g wrote:

lord of pensions and pilsner wrote:

cj4g wrote:

king_kong wrote:

If they need the cash for a medical procedure and have no other assets to monetize, yes, that’s exactly what I’m suggesting.

Exactly. It’s an asset they can tap into if they need to.

Cj4g–what province are you, Ontario? I hear everyone in Toronto is a “millionaire” with housing prices there.

lp+p

I’m in the Boston province of Canada. I think it got officially absorbed shortly after Trump got elected.

Have you paid off your U of Phoenix loans yet?

I am very fortunate. I don’t have any debt, no mortgage on either of my homes, and never had student loans–I stuffed my investment accounts instead. I chose the right parents – I learned what wealth is from them. 

You might as well be honest. You write like a fool, start a thread trying to figure out what it even means to be wealthy, have an opinion on the meaning of wealth that sounds like you got it from Rich Dad Poor Dad, and you expect us all to believe that despite all of this that you are actually already wealthy. Do you actually think anyone is buying it?

All true: I inherited my intelligence, temperament, discipline and good looks. My parents paid for my college education and got me started investing at a young age. I owe my good fortune entirely to my parents and I intend to pass on the same privilege to my own beautiful children. I can’t imagine anyone in this forum has a problem with that.

infinitybenzo wrote:

nothing wrong with that.  I’d rather be “I got my wealth from my parents and live in a $30mm condo in 15CPW” than say “yeah I had to do it all by myself and used to live in a closet in a “pre-war” building with no elevator on the 11th floor with 4 roommates for 7 years but now I made it so now…i live in a 1200 sq ft apartment in NYC on Canal St that I got for $3mm.

Canal St. is cool. For some reason I thought you lived in UWS (I mean I’d rather live along Canal).

"A theory that you can't explain to a bartender is probably no damn good."
- Ernest Rutherford

lord of pensions and pilsner wrote:

All true: I inherited my intelligence, temperament, discipline and good looks. My parents paid for my college education and got me started investing at a young age. I owe my good fortune entirely to my parents and I intend to pass on the same privilege to my own beautiful children. I can’t imagine anyone in this forum has a problem with gives a flying sh!t about that.

#FTFY

Isaiah_53_5 wrote:

infinitybenzo wrote:

nothing wrong with that.  I’d rather be “I got my wealth from my parents and live in a $30mm condo in 15CPW” than say “yeah I had to do it all by myself and used to live in a closet in a “pre-war” building with no elevator on the 11th floor with 4 roommates for 7 years but now I made it so now…i live in a 1200 sq ft apartment in NYC on Canal St that I got for $3mm.

Canal St. is cool. For some reason I thought you lived in UWS (I mean I’d rather live along Canal).

ehh Canal is not for me….

huh? i do live in uws….why did you assume that i was the latter of the two from the above “story?”  I don’t come out as the former - the 30mm condo inherited from parents type?

Be yourself. The world worships the original.

infinitybenzo wrote:

Isaiah_53_5 wrote:

infinitybenzo wrote:

nothing wrong with that.  I’d rather be “I got my wealth from my parents and live in a $30mm condo in 15CPW” than say “yeah I had to do it all by myself and used to live in a closet in a “pre-war” building with no elevator on the 11th floor with 4 roommates for 7 years but now I made it so now…i live in a 1200 sq ft apartment in NYC on Canal St that I got for $3mm.

Canal St. is cool. For some reason I thought you lived in UWS (I mean I’d rather live along Canal).

ehh Canal is not for me….

huh? i do live in uws….why did you assume that i was the latter of the two from the above “story?”  I don’t come out as the former - the 30mm condo inherited from parents type?

ohhhh ok haha I misread that

word

"A theory that you can't explain to a bartender is probably no damn good."
- Ernest Rutherford

some of you guys are nuts. of course you include home equity in net worth. i’ll give you a real world example where i’m from.

the cost of a house in my neighborhood is ~$800,000. if i own that property outright, i pay taxes of $5,000 per year. to rent this home would cost me $42,000 per year. to maintain the house in line with how a landlord would otherwise maintain the property, and ensure that my house does not depreciate in value, i would need to invest about $8,000 yearly. for argument sake, to be extremely conservative, let’s assume no inflation for any of these figures. all utility costs are the same whether i rent or own.

so my cost of renting is $42,000 per year and my cost of owning outright is $13,000 per year. oh great CFAs of AF, please calculate the present value of $29,000 per year in perpetuity. i’ll help you. assuming a discount rate of 5%, the value of owning over renting is $580,000. the thing is, because the return is after-tax and real estate is a low risk investment for long-term owners, a more proper after-tax real return goal might be closer to 3%. using a 3% discount rate, we get $967,000. these numbers are fairly close to the cost of the house are they not? hmmm. this is first page in level 1 folks.

Wow, MattLA, ya nailed it. And you’re a charterholder?

Matt Likes Analysis wrote:

some of you guys are nuts. of course you include home equity in net worth. i’ll give you a real world example where i’m from.

the cost of a house in my neighborhood is ~$800,000. if i own that property outright, i pay taxes of $5,000 per year. to rent this home would cost me $42,000 per year. to maintain the house in line with how a landlord would otherwise maintain the property, and ensure that my house does not depreciate in value, i would need to invest about $8,000 yearly. for argument sake, to be extremely conservative, let’s assume no inflation for any of these figures. all utility costs are the same whether i rent or own.

so my cost of renting is $42,000 per year and my cost of owning outright is $13,000 per year. oh great CFAs of AF, please calculate the present value of $29,000 per year in perpetuity. i’ll help you. assuming a discount rate of 5%, the value of owning over renting is $580,000. the thing is, because the return is after-tax and real estate is a low risk investment for long-term owners, a more proper after-tax real return goal might be closer to 3%. using a 3% discount rate, we get $967,000. these numbers are fairly close to the cost of the house are they not? hmmm. this is first page in level 1 folks.

I have two thoughts on this.

1. I wish property taxes were that low where I live

2. Thanks, this is a much clearer way of putting what I was originally saying when I said “If you’re going to not count home equity in the net worth of a homeowner, you’d have to somehow subtract the present value of expected rent payments from the net worth of a renter.”

lord of pensions and pilsner wrote:

Wow, MattLA, ya nailed it. And you’re a charterholder

Did you not understand that he was completely disagreeing with you, or have you now changed your mind?

Matt Likes Analysis wrote:

some of you guys are nuts. of course you include home equity in net worth. i’ll give you a real world example where i’m from.

Not necessarily disagreeing with all the analysis that followed, but the sum of the cash flows is not the same as home equity.  

So you basically said, “Home equity is included in net worth”, then went on to prove a totally different point.  

Of course a paid-off house is better than a not-paid-off house.  That’s not the question.  

82 > 87
Simple math.

Matt Likes Analysis wrote:

some of you guys are nuts. of course you include home equity in net worth. i’ll give you a real world example where i’m from.

the cost of a house in my neighborhood is ~$800,000. if i own that property outright, i pay taxes of $5,000 per year. to rent this home would cost me $42,000 per year. to maintain the house in line with how a landlord would otherwise maintain the property, and ensure that my house does not depreciate in value, i would need to invest about $8,000 yearly. for argument sake, to be extremely conservative, let’s assume no inflation for any of these figures. all utility costs are the same whether i rent or own.

so my cost of renting is $42,000 per year and my cost of owning outright is $13,000 per year. oh great CFAs of AF, please calculate the present value of $29,000 per year in perpetuity. i’ll help you. assuming a discount rate of 5%, the value of owning over renting is $580,000. the thing is, because the return is after-tax and real estate is a low risk investment for long-term owners, a more proper after-tax real return goal might be closer to 3%. using a 3% discount rate, we get $967,000. these numbers are fairly close to the cost of the house are they not? hmmm. this is first page in level 1 folks.

Can we also include tax deductions, mortgage repayments and lost opportunity cost of downpayment.

are any of you guys client portfolio manager or financial advisor of some sort?  What do YOU guys really tell your clients?  Some of you really tell them that even if the house is fully paid, nah don’t add that to your net worth bud that is “gone money.”

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth = 40k

So yes, you should include your equity portion of your house.

Be yourself. The world worships the original.

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

82 > 87
Simple math.

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

Yeah, I was thinking the same thing. So its not the cost of the house but the market value.

"A theory that you can't explain to a bartender is probably no damn good."
- Ernest Rutherford

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

#HomeEquityLoan

^ But isn’t that 180 degrees opposite of the “value” created by owning your own house, a la Matt’s analysis?  

So you’re saying that in order to create value (by monetizing your house) you have to destroy value (the future cash flows that you have given up by monetizing your house)?  

82 > 87
Simple math.

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

Be yourself. The world worships the original.

Greenman72 wrote:

^ But isn’t that 180 degrees opposite of the “value” created by owning your own house, a la Matt’s analysis?  

So you’re saying that in order to create value (by monetizing your house) you have to destroy value (the future cash flows that you have given up by monetizing your house)?  

You asked for a way for homeowners to access their home equity, correct?  Obviously the banks think it’s worth something…

#JusSayin

Greenman72 wrote:

^ But isn’t that 180 degrees opposite of the “value” created by owning your own house, a la Matt’s analysis?  

So you’re saying that in order to create value (by monetizing your house) you have to destroy value (the future cash flows that you have given up by monetizing your house)?  

Is that any different for any other asset you or anyone else owns? If you sell it, you stop reaping the benefits of owning it.

rofl i’ve been saying this 3 pages ago.

infinitybenzo wrote:

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

rofl i’ve been saying this 3 pages ago.

infinitybenzo wrote:

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

yup. not sure what the problem is here.  What’s next? companies should not include equity portion on buildings and land they own from Equities and to stay consistent take out the value of the land/building from Asset and any mortgage/loan from Liabilities?  LEAN out them financial statements!! lol

Be yourself. The world worships the original.

Nerdyblop wrote:

rofl i’ve been saying this 3 pages ago.

infinitybenzo wrote:

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

Same… KISS principle applies here folks…

Hey Hamilton, have a holly jolly Christmas.

infinitybenzo wrote:

Nerdyblop wrote:

rofl i’ve been saying this 3 pages ago.

infinitybenzo wrote:

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

yup. not sure what the problem is here.  What’s next? companies should not include equity portion on buildings and land they own from Equities and to stay consistent take out the value of the land/building from Asset and any mortgage/loan from Liabilities?  LEAN out them financial statements!! lol

Also don’t include the value of equipment that is necessary to producing your company’s core products. Your company has to keep making those products to meet demand, so how could you tap into the equity in that equipment?

Obviously PP&E has no value and should be left off the balance sheet.

cj4g wrote:

infinitybenzo wrote:

Nerdyblop wrote:

rofl i’ve been saying this 3 pages ago.

infinitybenzo wrote:

Greenman72 wrote:

infinitybenzo wrote:

you should include your equity portion of your house.

Question - how are you going to access that equity?  I mean, any asset is only worth what you can monetize, right?  (At least in the financial sense.)  

I am not into redefining words in our finance and accounting books or “what if that what if this”  Asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”  It is your money and you have access to that money.  It is a long term asset.

Net Worth = Asset - Liabilities

So a house costs 100k and you have 40% equity in the house. Let’s do accounting 101.

Net Worth = 100k - 60k

Net Worth (Equity) = 40k

We should look at what CFA material has to say about this

yup. not sure what the problem is here.  What’s next? companies should not include equity portion on buildings and land they own from Equities and to stay consistent take out the value of the land/building from Asset and any mortgage/loan from Liabilities?  LEAN out them financial statements!! lol

Also don’t include the value of equipment that is necessary to producing your company’s core products. Your company has to keep making those products to meet demand, so how could you tap into the equity in that equipment?

Obviously PP&E has no value and should be left off the balance sheet.

lol

"A theory that you can't explain to a bartender is probably no damn good."
- Ernest Rutherford

Greenman72 wrote:

Matt Likes Analysis wrote:

some of you guys are nuts. of course you include home equity in net worth. i’ll give you a real world example where i’m from.

Not necessarily disagreeing with all the analysis that followed, but the sum of the cash flows is not the same as home equity.  

So you basically said, “Home equity is included in net worth”, then went on to prove a totally different point.  

Of course a paid-off house is better than a not-paid-off house.  That’s not the question.  

the PV of savings due to owning a house outright and the market price of the house are not unrelated. me calculating the PV is simply to show that the market price of the asset isn’t created from thin air. the market price or an appraised price is a more accurate representation of what the public is willing to pay for this PV of savings. we can think of the market price as being anchored to the PV of savings over a long-period of time but that the market price can deviate greatly from the PV of savings at any given time for a variety of reasons.

i’m a financial advisor and of course we include home equity in clients’ net worth. we are conservative estimating values when prices rise rapidly. at the end of the day, the home equity number doesn’t mean much and it only really is discussed in the context of estate planning. you need to know how much they have to access should they be 90 and need to go into a nursing home.

Matt Likes Analysis wrote:

 at the end of the day, the home equity number doesn’t mean much and it only really is discussed in the context of estate planning. you need to know how much they have to access should they be 90 and need to go into a nursing home.

I agree with this.  

When discussing estate planning, and especially estate tax, you have to include the home equity. 

But when discussing retirement planning, I specifically exclude it, for all the reasons mentioned above.  (Again, unless the client has both the ability and desire to downsize and monetize their home equity.)  

82 > 87
Simple math.