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Well, no you cant live off your home. I agree.
However, these numbers dont say too much.

Person A may have a 1.5 million dollar home and a net worth of 2 million.--home is 75% of net worth

Person B may have a 100 000 home with a new worth of 300 000. --home is 33% of net worth ...
Too many variables to make it meaningful.

If it's Windsor or somewhere reasonable - Person A looks better. If it's Vancouver or Toronto - then I'm leaning towards person B.


My point is the percentages are meaningless.
Agreed ... though I'd hope that the closer to retirement, the less the % the house is. That certainly gives one a lot more flexibility in retirement that having huge amounts tied up in a house.


Plus, most people do downsize when they retire. That frees up cash too.
They do?

Most of my relatives has fallen in love with their house so that at retirement - they are maintaining a multi-bedroom house with two or less people in it. They are only downsizing when they have limited mobility.


Cheers
 

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In my case it is zero unless you count the sailboat that I bought with the proceeds from the house...then it is 25%
 

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>>But we have seen from the US meltdown that home equity should never be counted on for living.>>

I agree fully. You never know what can happen. You cant count on it. Thought most DO downsize and most DO free up cash when doing so. There is no guarantee.
 

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Question-when you are giving your percentages, are you deducting the mortgage? Or are you using the full value of the house?
 

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Discussion Starter · #50 ·
Good article at the Financial Post today by Garry Marr on this topic. As the title says: Stocks beat real estate in the long run. As he says, and as I have always believed, a house is not an investment, and any appreciation is just a bonus.

http://business.financialpost.com/2...le-between-stocks-and-real-estate-stocks-win/

From the article: Statistics Canada says half of our wealth is now tied up in property. Clearly, many of us have well exceeded the 30% to 50% range financial advisors often suggest as the appropriate portion of assets to be held in bricks and mortar.
 

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Like MOA, we don't consider our home to be an investment. We also don't include it in our RSQ calculations.

I think this thread is useful. The percentage of net worth tied up in a home is one indicator of financial readiness for retirement. A million dollar net worth* that includes a nine hundred thousand dollar home leaves a paltry 100K to generate retirement income. You'd probably end up needing to "re-balance" through buying down or taking a reverse mortgage.
 

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Good article at the Financial Post today by Garry Marr on this topic.
I think the article misses a number of points it could have made. One cannot compare just the price appreciation on home prices to total return from stocks. Rental income (or imputed rents if one is owning a home) is a huge component of returns from real estate. The article is therefore comparing apples to oranges.

Also, risk should be considered when comparing returns. If stocks are riskier than real estate, then one would expect stocks to post higher returns.
 

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House (actually condo) is less than 10% of our total investments. I'm retired and 65 yrs old and I prefer it this way, a house is a lifestyle choice and provided that you are comfortable and in a city that you enjoy, why saddle yourself with a house that is costly to mantain?

I believe in real estate investment but restrict my exposure to REITS, I do not have the patience or mindset to invest in rentable real estate.
 

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Another factor the experts fail to allow for is leverage. It is possible for a young couple to buy their first house with 10% down. If the house goes up 10% they doubled their money. The equity can build quickly in a rising market, even if it is only 5% a year.

If they are like most people they will "trade up" 2 or 3 times in their lifetime using equity for a down payment and end up with quite a substantial sum of money when the last house is paid for. All from a small down payment, and regular monthly payments that are no more than they would have paid in rent.

There are thousands of examples of ordinary Canadians who put a few thousand down on their first house 20, 30 or 40 years ago who now own a house worth $250,000 or more. In many cases this the bulk of their fortune. We are talking about people who are not sophisticated financially (they don't follow Canadian Money Forum lol).

I know the accountants out there can prove that it is cheaper to live in an apartment than own a house, and if you put your savings into stocks you will end up richer. But I can point to 100 home owners who have made money on their home, for every accountant or mathematician who has made more money in stocks.

There is also the lifestyle factor. Some people get more pleasure out of their own home and garden than they would looking at a broker's statement, no matter how many figures there are in the bottom line.

I know this is not a popular opinion on this forum. I like to point out that your home owning friends are not necessarily irresponsible idiots no matter what the financial press says.
 

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Can't disagree with you Rusty...............but you don't think that times have changed?

As I was buying my homes over the years............our wages kept going up, and the % of income the mortgage payments required from my income continually went down year after year.

I don't think that happens in today's job market.

Today, people extend themselves to the maximum to buy their first home, and then money gets tighter and tighter from there.
 

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We have always owned our homes. When we had children it was a lifestyle choice and an investment choice. And our various homes in Vancouver and Calgary appreciated well in excess of stock market performance- and of course we we needed somewhere to live.

Now, not so much, We are retired and are about to rent for the first time in in years. Why? We need a lock and go place so we can travel. Don't want a' furnace' and don't want to be responsible for upkeep. We also want a smaller living space. In our case, we believe that renting may put us ahead.

Rents in our area are a little low compared with the price of the condo and the mtce fees attached to it. And we have some flexibility. We may decide to put everything in storage again and travel for six months. Or we may decide to move to another country altogether. At our point in life, early retirees, the decision to rent or buy very much takes into account the financial aspects. We do not need the equity on former home to live. But if we can get a better return by investing that equity instead of buying a condo or a house we intend to do so.
 

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Another factor the experts fail to allow for is leverage. It is possible for a young couple to buy their first house with 10% down. If the house goes up 10% they doubled their money. The equity can build quickly in a rising market, even if it is only 5% a year ...
True.

Though unless one is willing to move and lock in the equity, it's not necessarily going to be there later. Then too, maintenance costs can eat it up from an investment perspective. IMO it's similar to someone buying stock that does not pay dividends and being proud of it trading at 100% more. Unless one cashes in, it's all on paper. The difference is that the house is likely a lot tougher to cash in on.


I know the accountants out there can prove that it is cheaper to live in an apartment than own a house, and if you put your savings into stocks you will end up richer. But I can point to 100 home owners who have made money on their home, for every accountant or mathematician who has made more money in stocks ... There is also the lifestyle factor ...
That's why IMO it is too simplistic to look at a house as an investment (unless one is flipping them).

Whether it's cutting costs at home, renting instead of owning, staying with relatives instead of renting, having cash flow is great but if one does not choose to invest it, one will not a have a chance to build one's net worth.


Cheers
 

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I think it boils down to asset allocation. Are you willing to reduce your exposure to your home equity as an investment choice. If the answer is no then the question is moot.

Are you counting on your home equity to retire? If so what are you doing to reduce exposure to that one asset class?
 

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So BC property assessment is now available to look up on their website. Our property has gone up 35% this year and is now 33% of our networth. When we first started, it was ALL we had.

Happy New Year!
 
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