Do you seriously think you can afford to retire? (corporation, legal, legally)

[mathjak107]

a mutual fund is an asset . dont even question it. it isnt being used or consumed by me to live in and it may even be spinning off dividends and capital gains increasing my income .

i can sell it, spend the money at anytime or reinvest it as i see fit. i dont even need to buy a fund . i can buy another asset class as well.

you need a place to live when you own a home and it consumes money to exist and house me. your bills are not investment costs, they are housing expenses!

the fine art on my walls are a consumption item. they are worth alot of money. they cost me to insure but until the day comes if ever that they will be sold they are not carried as an asset by me, they were an expense and a consumption item like jewelry .. perhaps one day when im not using it for my own enjoyment ill sell it and it will be an asset again.

like i said , it all depends why you want to count things and what you want to count. i wont argue against carrying the equity as an asset. i just dont count a home im living in as increasing income in any way , only improving exsisting cash flow,

[mathjak107]

Originally Posted by MrRational

has there been a thread on any topic where you don't try to shift the discussion
to how you justify your preference for renting?

nope , not as long as posters make stupid comments like renters are destined to be losers or you can not retire easily without owning a home..

i own a lot of real estate so im not anti owning anything. i just like renting at this stage.

[michgc]

Originally Posted by mathjak107

a mutual fund is an asset . dont even question it. it isnt being used or consumed by me to live in and it may even be spinning off dividends and capital gains increasing my income .

i can sell it, spend the money at anytime or reinvest it as i see fit. i dont even need to buy a fund . i can buy another asset class as well.

you need a place to live when you own a home and it consumes money to exist and house me. your bills are not investment costs, they are housing expenses!

the fine art on my walls are a consumption item. they are worth alot of money. they cost me to insure but until the day comes if ever that they will be sold they are not carried as an asset by me, they were an expense and a consumption item like jewelry .. perhaps one day when im not using it for my own enjoyment ill sell it and it will be an asset again.

like i said , it all depends why you want to count things and what you want to count. i wont argue against carrying the equity as an asset. i just dont count a home im living in as increasing income in any way , only improving exsisting cash flow,

So what you are really saying is that a mutual fund is a more liquid asset than a home because I can also sell a home and spend the money I have in it or reinvest it, too just like you can with a mutual fund. It will just take longer to sell than a mutual fund. I also would count maintanance fees on a mutual fund as expenses. Not all mutual funds generate income or capital gains but most people would still consider them assets.

Yes, I need a place to live, but I can sell my home and rent a comparable home to live in. In fact I gave an example earlier where I lived in a home and moved out and then rented it out. The house didn't suddenly become an asset once it became a rental - it had been one all along. If I move out and rent an identical home, the expenses that were associated with my home when I owned it would now just be considered rent versus mortgage. The difference is I would have no home equity - it would be in cash instead. It would essentially be a transfer of assets from a home to cash and a transfer of expenses - from mortgage/taxes/mainanance expenses into rental expenses.

[mathjak107]

You can sell a home but you still need a home to live in and that is the difference. sure you can rent but those housing costs still keep adding up . the clock doesnt stop because you sold.

the point is renter or buyer the clock keeps ticking and its all one big expense. for some it may be more over a lifetime and for others it may be less but trying to take your cost of food , housing, clothing and health care and trying to get around the fact these are our expenses of life makes little practical sense.

When you stop using something yourself then its an equal in fit and form to other asset classes.

[slackjaw]

Originally Posted by mathjak107

you can call anything an asset . my shoes , my furniture and everything else i own are an asset depending how far i want to count residual value on possessions.

Correct. Assets are things of value, and they all count towards a person's net worth.

A house is an asset, how it affects cash flow is irrelevant in making that distinction, as is the drivel about whether or how someone is using something.

[Escort Rider]

A lot of this discussion about whether a home is an asset or a liability represents the triumph of arcane theory over common sense. My town house is paid off and the equity in it, at current market prices deducting for closing costs, is fairly close to $325,000. That equity is an asset, despite the following factors:

1. Market values of housing in my neighborhood can go back down, but so can stock and bond and mutual fund prices. Stocks and bonds and mutual funds are clearly assets.

2. Certain expenditures are necessary to keep the townhouse and to maintain its value. Those are primarily property taxes, insurance, HOA fees (which cover exterior maintenance such as painting), and occasional expenses for interior maintenance and repair. Those expenses themselves are liabilities which I wouldn't have if I slept under cardboard in the park, of course. However, the total amount of such expenses in a given year is negligible when compared to the approximately $325,000 I would net (after closing costs) upon sale at current prices. So I have to recognize that the value of my asset is offset to a relatively small degree by the requirement of regular expenditures to maintain that value, expenditures that are basically absent with stocks, bonds, and mutual funds. But that doesn't turn it into a liability because I can cash in the considerable net value of the asset at any time by selling it.

3. Not every homeowner owns an asset, because some have negative equity in their homes. In that case the home is a liability because it cannot be sold without bringing money to the table, and the owner is still stuck with the insurance, property taxes, and repair costs.

In retirement a paid-off home is an asset of special value because the expenses (insurance, taxes, and repairs/upkeep) are in almost all cases considerably less than the rent on an equivalent dwelling or the same owned home with a mortgage payment added on top of those other expenses. Thus the asset of an owned, paid-off home reduces expenditures, and a reduction of expenditures is the same thing, in terms of one's net worth, as the same amount in additional income.

[mathjak107]

A reduction in expenses is a reduction in expenses and how that reduction comes doesnt matter. better cash flow is better cash flow.

Like i said earlier the retiree renter who goes from a 2500 a month 3 bedroom apartment to a 1500 a month 1 bedroom sees the same reduction as a homeowner paying off that mortgage and falling the same 1000 a month .

The cash flow improves the same in either case.

equity does not come into play in any retirement income stream until the day comes its tapped. either with the house being sold or with a piece of the house being sold each year as in a reverse mortgage.

in either case renting or buying the odds of a succesful retirement are the same.

its going to be unique to each one of us and anyone who argues other is just a fool.

like i proved in my own case i could have put equal amounts in my house or my fidelity funds ,rented since 1987 and subtracted out every penny of rent and i can buy more than 2 of those homes today.

thats me, it may not have been you but those who argue homeownership is the holy grail of retiriment for everyone or the only way are just ignorant in the subject.

[slackjaw]

Originally Posted by Escort Rider

A lot of this discussion about whether a home is an asset or a liability represents the triumph of arcane theory over common sense. My town house is paid off and the equity in it, at current market prices deducting for closing costs, is fairly close to $325,000.

Exactly, and it is hilarious people trying to judge whether it is an asset based on whether that asset also incurs costs or contributes to an income stream. An asset is something of value.

[tjarado]

A house (RE) is an asset. A mortgage is a liability.
If you "own" a home and a mortgage you will have positive, negative, or no equity.
Some assets are depreciating assets..like a car, boat, or a house that is not maintained or that loses value in a declining market.
Investments are assets that yield income (dividends or interest).
Speculations are assets that may gain or lose value but don't produce income.
Consumption items (house, car) will depreciate without maintenance, and often with maintenance.
Insurance is a sunk cost to protect against future loss having nether yield nor capital gain.
Some assets have attributes of more than one kind. For example, residential RE is both a consumption item and speculation; gold is both insurance and speculation; single premium immediate annuities are both investments and insurance; collectibles are consumption and speculation, etc. etc.

In the end what matters in retirement is Free Cash Flow. In that sense I agree with Mathjak - it doesn't matter how you get there, reduce expenses or increase investment income, both improve the quality of life in retirement when time becomes a very precious commodity.

I rented for half my career and owned for the second half. What made the difference in my financial security was saving like hell, staying out of debt, and educating myself in all matters, financial and non-financial.
The rest was luck.

[Escort Rider]

Originally Posted by mathjak107

.....thats me, it may not have been you but those who argue homeownership is the holy grail of retiriment for everyone or the only way are just ignorant in the subject.

You're right - it wasn't me arguing that home ownership is the holy grail of retirement for everyone. There had been so much ink spilled here about whether a home is an asset or a liability that I finally felt moved to put my two cents in, because I know my town house is an asset. An asset is simply a thing of value, like Professor Slackjaw wrote in his 1990 Ph.D. dissertation.