Comments on: Imputed Rent from an Owner-Occupied Home http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Garth Turner’s Dodgy Advice | Canadian Capitalist http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-501828 Garth Turner’s Dodgy Advice | Canadian Capitalist Thu, 28 Apr 2011 14:40:10 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-501828 [...] bonds in taxable accounts is terrible when Al also has $200,000 is his RRSP account. Fourth, home equity is not “non-performing” when the owner is living in it (and not paying for the privilege). Fifth, borrowing against a free-and-clear property is not [...] [...] bonds in taxable accounts is terrible when Al also has $200,000 is his RRSP account. Fourth, home equity is not “non-performing” when the owner is living in it (and not paying for the privilege). Fifth, borrowing against a free-and-clear property is not [...]

]]> By: A tuneup to skip | Canadian Capitalist http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-239111 A tuneup to skip | Canadian Capitalist Wed, 04 Aug 2010 22:51:32 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-239111 [...] home as an investment (let’s be charitable and assume that the sloppy math that ignored the imputed rent from owning a home is an oversight). It sounds perfectly reasonable because as any homeowner will tell you, houses [...] [...] home as an investment (let’s be charitable and assume that the sloppy math that ignored the imputed rent from owning a home is an oversight). It sounds perfectly reasonable because as any homeowner will tell you, houses [...]

]]> By: FinancialJungle.com http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42505 FinancialJungle.com Wed, 06 Jun 2007 04:03:59 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42505 Technically speaking, you're selling your home bit by bit each month by consuming the "invisible" income. :D If the home was tenanted, the rents would've been retained on the balance sheet. With RIMM, you may not receive income, but selling your shares is like selling your balance sheet. The end result is the same. Technically speaking, you’re selling your home bit by bit each month by consuming the “invisible” income. :D If the home was tenanted, the rents would’ve been retained on the balance sheet. With RIMM, you may not receive income, but selling your shares is like selling your balance sheet. The end result is the same.

]]> By: ML http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42481 ML Wed, 06 Jun 2007 02:20:27 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42481 When you have finally reached reitrement , the cost of maintaining a home is more important than its monetary value. However, if you live in an area where Market Value Assessment is a determinant of your municipal taxes , then the more your house is deemed to be worth, the more you will be privileged to pay for that honour. You do not want to be "house poor' when you reach retirement. When you have finally reached reitrement , the cost of maintaining a home is more important than its monetary value.
However, if you live in an area where Market Value Assessment is a determinant of your municipal taxes , then the more your house is deemed to be worth, the more you will be privileged to pay for that honour.
You do not want to be “house poor’ when you reach retirement.

]]> By: FourPillars http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42431 FourPillars Tue, 05 Jun 2007 20:43:21 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42431 GIV - I can derive income from my $50k RIM stock retirement portfolio by selling it off bit by bit. You can't do that with a house unless you have a huge property or are willing to downsize or can rent part of it out - ok I guess you can derive income from your house but not as easily as selling 100 shares of RIM. Personally I think the size of your mortgage is a lot more relevant for retirement planning than the value of the house. In my case I know I have to eliminate the mortgage completely before retirement so a lot of my planning involves figuring out how to pay it off most efficiently. The house value may become important later on if we decide to move but for now - it doesn't mean a thing... GIV – I can derive income from my $50k RIM stock retirement portfolio by selling it off bit by bit. You can’t do that with a house unless you have a huge property or are willing to downsize or can rent part of it out – ok I guess you can derive income from your house but not as easily as selling 100 shares of RIM.

Personally I think the size of your mortgage is a lot more relevant for retirement planning than the value of the house. In my case I know I have to eliminate the mortgage completely before retirement so a lot of my planning involves figuring out how to pay it off most efficiently. The house value may become important later on if we decide to move but for now – it doesn’t mean a thing…

]]> By: ThickenMyWallet http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42429 ThickenMyWallet Tue, 05 Jun 2007 20:29:51 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42429 As I implied on FJ's post, net worth is a balance sheet calculation whereas real estate income is a statement of cash flow calculation. Anyone who takes something off a balance sheet because it has a negative impact on cash flow is mixing apples and oranges. As for the benefits of owing a home, I believe I read a study where the Federal Reserve reports that an average home owner is worth over 30 times more than an average renter. Imputed income or not, statisically speaking, you are better off owing than renting. As I implied on FJ’s post, net worth is a balance sheet calculation whereas real estate income is a statement of cash flow calculation. Anyone who takes something off a balance sheet because it has a negative impact on cash flow is mixing apples and oranges.

As for the benefits of owing a home, I believe I read a study where the Federal Reserve reports that an average home owner is worth over 30 times more than an average renter. Imputed income or not, statisically speaking, you are better off owing than renting.

]]> By: GIV http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42423 GIV Tue, 05 Jun 2007 19:54:26 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42423 I find it odd that people who don't include their home would do so because it doesn't produce any income. I mean, does that $50,000 you've got invested in RIM stock produce income, either? At the end of the day, the whole point of tabulating net worth is to track general progress. It's not really some sort of race, I don't think. As long as that's the sentiment, I suppose you can include or omit anything you want. I find it odd that people who don’t include their home would do so because it doesn’t produce any income. I mean, does that $50,000 you’ve got invested in RIM stock produce income, either?

At the end of the day, the whole point of tabulating net worth is to track general progress. It’s not really some sort of race, I don’t think.

As long as that’s the sentiment, I suppose you can include or omit anything you want.

]]> By: FinancialJungle http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42376 FinancialJungle Tue, 05 Jun 2007 17:17:03 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42376 I concur with CC. A paid-off home does improve your cash-flow by cutting down expenses. An "invisible" income isn't so invisible when you can appreciate the rents saved. A home is really no different from a portfolio. Here's a superficial example. Say it's essential for you to retire with $3,000 income per month: $1,000 rent, $600 food, $300 utilities, and etc. You can "invest" in a house to cover the $1,000 housing cost; you can invest in stock AAA to cover the $600 food expense; you can invest in stock BBB to cover the $300 utility costs. So your portfolio is not that different from your home, except in a stock portfolio, you witness money flowing from the stocks to your bills. For all the reasons you want to remove the home from your retirement balance sheet, you can apply the same rationales to your portfolio. If stock AAA is covering my all dietary requirements, should I exclude it from my balance sheet? I concur with CC. A paid-off home does improve your cash-flow by cutting down expenses. An “invisible” income isn’t so invisible when you can appreciate the rents saved.

A home is really no different from a portfolio. Here’s a superficial example. Say it’s essential for you to retire with $3,000 income per month: $1,000 rent, $600 food, $300 utilities, and etc.

You can “invest” in a house to cover the $1,000 housing cost; you can invest in stock AAA to cover the $600 food expense; you can invest in stock BBB to cover the $300 utility costs. So your portfolio is not that different from your home, except in a stock portfolio, you witness money flowing from the stocks to your bills.

For all the reasons you want to remove the home from your retirement balance sheet, you can apply the same rationales to your portfolio. If stock AAA is covering my all dietary requirements, should I exclude it from my balance sheet?

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42366 Canadian Capitalist Tue, 05 Jun 2007 16:13:45 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42366 Brad: Fair enough. In your situation, you do need extra insurance if a home is purchased. My example is also somewhat artificial because people tend to own a bigger and nicer home than the one they were renting. But it's the only way to make an apples-to-apples comparison. Brad: Fair enough. In your situation, you do need extra insurance if a home is purchased. My example is also somewhat artificial because people tend to own a bigger and nicer home than the one they were renting. But it’s the only way to make an apples-to-apples comparison.

]]> By: brad http://www.canadiancapitalist.com/imputed-rent-from-an-owner-occupied-home/#comment-42365 brad Tue, 05 Jun 2007 16:03:14 +0000 http://www.canadiancapitalist.com/2007/06/04/imputed-rent-from-an-owner-occupied-home#comment-42365 Four Pillars, right, I always forget about the "equivalent house" business. In our case we're going from a 3-bedroom apartment for which we pay $550/month (which she could cover) to a 3-bedroom home for which our mortgage payments will be over $2,000/month (which there's no way she could cover). And yes, after the mortgage is mostly paid down we will reduce our insurance coverage accordingly. But it is an extra expense during the first five years or so. Four Pillars, right, I always forget about the “equivalent house” business. In our case we’re going from a 3-bedroom apartment for which we pay $550/month (which she could cover) to a 3-bedroom home for which our mortgage payments will be over $2,000/month (which there’s no way she could cover). And yes, after the mortgage is mostly paid down we will reduce our insurance coverage accordingly. But it is an extra expense during the first five years or so.

]]>