Net worth

[Flashback]

It is also good to have a big gold chain around the neck. If something happen you can sell it and pay an attorney. This chain (about 2-3 kg) is also a liquid asset.

[ohai]

Yes, if you have a large gold object with significant value, you should include that in your net worth. What are you saying?

[Sweep_the_Leg]

@ohai

Yes, if you have a large gold object with significant value, you should include that in your net worth. What are you saying?

Net worth of ohai < Mr. T

[Flashback]

Hold liquid assets only, easy portable especially if you live in turbulent area. Otherwise, your net worth in the form of RE may suddenly deteriorate. If something happens, cut & run away. And it’s good to have a supply of canned food and water, may be worth more than everything under some circumstances.

[cj4g]

@Sweep_the_Leg

^The actual answer: It’s a huge outlier for the average person so it skews results. You could almost think of a person’s net worth being like a company’s Quick Ratio. You take cash and marketable securities (and accounts receivable, but that just makes the metaphor more confusing) and divide it by short term liabilities. A house wouldn’t fall into either the nominator or denominator. It’s illiquid so not immediately marketable. Or, it’s a long-term liability.

By removing it entirely, you get a pretty clear picture of that person’s current financial well-being.

You’re basically saying that all other things being equal, renters are worth more than homeowners. While I agree that they are certainly more liquid, I disagree with the idea that buying a house hurts your net worth and hurts your financial well being.

[GorillaNerd]

yea i dont understand why people continue paying an underwater asset. at that point, i would stop paying, and live for 1 year free of rent. lol.

some people may say this is immoral. but the banks know whats up. we’re all willing players. the banks know what collateral means, they shoulda asked for more dp. charged a higher rate, etc.

@Flashback

@ohai

If I have a $20 million house and $1 million cash, that is a lot better than having $1 million without the house.

…and $25 M mortgage liability. Net worth = negative. If you don’t have a family, rather hold cash and liquid assets and rent a house or an apartment. You may also easy transfer your wealth and run away from current location if necessary.

[cj4g]

@Flashback

@ohai

If I have a $20 million house and $1 million cash, that is a lot better than having $1 million without the house.

…and $25 M mortgage liability. Net worth = negative. If you don’t have a family, rather hold cash and liquid assets and rent a house or an apartment. You may also easy transfer your wealth and run away from current location if necessary.

Well if you’re not counting home related assets or liabilities then you’d never know that the guy who is upside down on his mortgage has a -$4 million net worth.

[Sweep_the_Leg]

@cj4g

@Sweep_the_Leg

^The actual answer: It’s a huge outlier for the average person so it skews results. You could almost think of a person’s net worth being like a company’s Quick Ratio. You take cash and marketable securities (and accounts receivable, but that just makes the metaphor more confusing) and divide it by short term liabilities. A house wouldn’t fall into either the nominator or denominator. It’s illiquid so not immediately marketable. Or, it’s a long-term liability.

By removing it entirely, you get a pretty clear picture of that person’s current financial well-being.

You’re basically saying that all other things being equal, renters are worth more than homeowners. While I agree that they are certainly more liquid, I disagree with the idea that buying a house hurts your net worth and hurts your financial well being.

That’s not at all what I was saying. I was just explaining why homes are left out of many net worth calculations.

[hashtag]

I’d add the home equity to all other (assets - liabilities) to calculate net worth.

#ButThatsMe

[infinitybenzo]

@Flashback

@ohai

If I have a $20 million house and $1 million cash, that is a lot better than having $1 million without the house.

…and $25 M mortgage liability. Net worth = negative. If you don’t have a family, rather hold cash and liquid assets and rent a house or an apartment. You may also easy transfer your wealth and run away from current location if necessary.

If anyone has a 25MM mortgage then at 4% rate the person is paying $1.4MM a year on mortgage which means he is making a bank. Anyone who makes over $2MM a year on a consistent basis to secure a loan like that is worth millions and definitely in the top 1%.

If you actually build a “model” that compares "rent vs ownership’ it becomes very very clear that hands down owning a home is infinitely beneficial compared to renting.

[Flashback]

@infinitybenzo

If anyone has a 25MM mortgage then at 4% rate the person is paying $1.4MM a year on mortgage which means he is making a bank. Anyone who makes over $2MM a year on a consistent basis to secure a loan like that is worth millions and definitely in the top 1%.

That’s normal situation in many countries maybe is not usual in yours. It is not easy to get mortgage loan on some emerging markets and it is expensive source of financing and is often overcoraterallized. It is often situation for mortgage borrowers on emergings that must enter into loan in currency other than domicile and are exposed to currency and floating IR risk over long term. There are mortgage with expiration of 20-30 years.

@infinitybenzo

If you actually build a “model” that compares "rent vs ownership’ it becomes very very clear that hands down owning a home is infinitely beneficial compared to renting.

Maybe if you have family thus home would be an inheritance for your children. Or your home is in attractive area, has its residual value which may appreciate as time passes.

What if you purchased home in not so attractive area which cannot be easily sold and you changed your mind but still have an expensive mortgage debt?

What about property taxes? What about maintenance costs which may be partially covered by some rent contracts.

What if your job description consider frequent migration, even outside of your domicile country.

Owning home is still attractive vs renting in each situation?

[infinitybenzo]

I feel like this is wasting time but what the hell lmao this is AF.

" What about property taxes? What about maintenance costs which may be partially covered by some rent contracts. "----Well in the model, i created, taxes, agent fee, maintenance fees, HOA fees, etc are all included. Prop taxes are tax deducted as well as interest but that is off topic.

" What if you purchased home in not so attractive area which cannot be easily sold and you changed your mind but still have an expensive mortgage debt?" -----You must have bought the place for a discount because of this exact reason?

Here is a very simple run down:

You buy a 600k house with 200k downpayment so 33% down payment rate. You borrow at 3.6% given 10 year rate because well as you said, you might be a frequnt migrator.

You sell the house in 6 years to move. Each of the 6 years, your house went up by 3% for the heck of it. So, you sold the house at $716,430. You get your initial $200,000 back and $116,430 realized gain AND ~$40,000 of your principal back (which of part of your mortgage payment). NET = $356,430. Thanks to 3-1 leverage, you’ve made $156,430 on your $200,000 down payment or 78% return.

In the meantime, your rental went up by 3% every single year…but you’ve invested your 200k in the market and returned you mmm say 8.5% a year. Very healthy returns. Year 6, your investments is now at $326,293 or 63% gain.

Thanks to mortgage leverage of 3-1, a mere 3% annual property appreciation beat the market return of 8.5%. Not to mention equity portion in your mortgage payments, tax deductions from interest and prop taxes and other deductions. If you actually owned your home from 2012 to present and down paid around 30% on your home, you know your returns, which is staggering. Sell it and take the cash and move. Or rent it out giving you an okay yield while you “migrate” then sell the prop when the time is right…

[Flashback]

@infinitybenzo

I feel like this is wasting time but what the hell lmao this is AF.

" What about property taxes? What about maintenance costs which may be partially covered by some rent contracts. "----Well in the model, i created, taxes, agent fee, maintenance fees, HOA fees, etc are all included. Prop taxes are tax deducted as well as interest but that is off topic.

Again. Not under each legislative. I simply cannot deduct those in my personal tax return. I am not an US citizen.

@infinitybenzo

" What if you purchased home in not so attractive area which cannot be easily sold and you changed your mind but still have an expensive mortgage debt?" -----You must have bought the place for a discount because of this exact reason?

Here is a very simple run down:

You buy a 600k house with 200k downpayment so 33% down payment rate. You borrow at 3.6% given 10 year rate because well as you said, you might be a frequnt migrator.

You sell the house in 6 years to move. Each of the 6 years, your house went up by 3% for the heck of it. So, you sold the house at $716,430. You get your initial $200,000 back and $116,430 realized gain AND ~$40,000 of your principal back (which of part of your mortgage payment). NET = $356,430. Thanks to 3-1 leverage, you’ve made $156,430 on your $200,000 down payment or 78% return.

In the meantime, your rental went up by 3% every single year…but you’ve invested your 200k in the market and returned you mmm say 8.5% a year. Very healthy returns. Year 6, your investments is now at $326,293 or 63% gain.

Thanks to mortgage leverage of 3-1, a mere 3% annual property appreciation beat the market return of 8.5%. Not to mention equity portion in your mortgage payments, tax deductions from interest and prop taxes and other deductions. If you actually owned your home from 2012 to present and down paid around 30% on your home, you know your returns, which is staggering. Sell it and take the cash and move. Or rent it out giving you an okay yield while you “migrate” then sell the prop when the time is right…

Again, situation in your area not in mine.

Wasting time. That’s the only thing we agree with…

[infinitybenzo]

you are not in the US I assume because citizen or not you still get the benefits if you own a house. But yeah, for you, rent 4 life.

[Flashback]

I own an apartment. If I was a single, renting would be much less expensive and more flexible option for me.

[GorillaNerd]

k but youre not comparing apples to apples. youre talking about leverage, which is whack, that obvi has more risks.

with that said, i would rather own than rent. there’s also the tax benefits from owning a house. and if it goes underwater, i can tell the bank to *** * ****.

[infinitybenzo]

@Nerdyblop

k but youre not comparing apples to apples. youre talking about leverage.

so , you pay 100% cash on homes? not too many of us do that. Most of us get a mortgage loan (leverage) not because we want to but becauese we need to.

[ohai]

If you can get a mortgage for 4% or lower, and deduct interest expense on top of that, economics are probably in favor of financing your home purchase rather than paying cash.

Yes, you could buy SPX with 80% margin and I think you would outperform rental properties over that period. Also, what kills your return in real estate is transaction cost. So if you happen to be a broker and can represent yourself, that is a big advantage.

[infinitybenzo]

tell me about it. These broker fees are outrageous. 5%!!! Maybe I should post myself on zillow and see where i can go from there. I am thinking of moving bit North (Westchester County) or even CT or NJ. I want a house BAD!!! with yard and 3 car garage. I want to own not only my house but also some land.

[Flashback]

Supposed you bought a house in attractive environment. Few years later, for some reason this is no longer attractive area and you want to cash this house.

Since, circumstances rapidly changed, now there is a low demand any you’re forced to sell with a big discount and high transaction cost.

With interest on mortgage debt (regardless if tax deducted) you overpaid this house.

This is not rare situation.