A reader asks, “Can we include our own living property/house in total net worth? I had some discussions with friends about a particular case – where the total net worth will be significantly higher than the required retirement corpus if the living house/property is included”.
“It’s an independent house in Chennai (NOT a flat!) And they are also NOT emotionally attached to the house. In the worst-case scenario, they are willing to sell the house and move to tier-2/3 cities. Can you please clarify? In my research, I came across mixed answers about including the living property (usually, it’s all assets – liabilities?).”
A fail-safe option, a plan B, or some insurance is always good. However, it is folly to include the steps of plan B into plan A and then claim plan A is feasible. Yes, residential property can always be turned into a source of income if necessary.
Either sell outright or reverse mortgage (if the property is eligible). See” Can reverse mortgage be used as an income source after retirement? But that is plan B. It becomes plan-A only if all else fails. Why?
I am ten years from retirement, and I ask myself: why should I fret so much about investing X amount each and getting a target retirement corpus? I fully own the house I live. I can always sell it, buy a retirement home near a tier 2/3 city, and use the rest of the cash to beat inflation. Or, at the very least reverse mortgage it.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
What could go wrong with this? Just about everything.
- You or your spouse may feel reluctant to shift cities later, leaving your friends and relatives.
- You may realise living in a remote retirement villa, leaving the hustle and bustle of the city, is not easy. There would be power cuts, a lack of amenities etc.
- Your children abroad may decide to return home and urge you not to sell.
- You or your spouse may develop health issues that need familiar doctors’ attention.
- You may suddenly decide to leave the house as a legacy for your kids because you have a sudden urge to do so. I could go on and on. (I know people who have changed their minds as listed).
You can’t assume your circumstances or mindset in future will be the same as today and rely on the cash flow from a current consumable. Plan A cannot rely on plan B (and vice versa).
Today, you are living in that property, and therefore, that property has no value because you will not sell. That property is not an asset. It is consumable and, therefore, should not be part of your net worth.
You may be ready to sell it tomorrow, but you can depend on such cash flow today. If and when you are ready to put the house on the market for an immediate sale, then and only then, it is an asset with value.
Also, real estate prices are arbitrary. Even if you don’t include it in your net worth, the value you estimate today (when there are no actual buyers) and the value you observe when the house is on the market (either today or later) can be significantly different. So relying on it now can be an even bigger mistake!
So if you still have a few years left to retire, don’t waste a moment of it and invest as hard as possible. If you own the house you live in, do not include it in your calculations unless you are going to sell immediately. Always treat it as an independent fall-back option.”
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)