Net Worth is a wonderful subject. Everyone in the FIRE community talks about it fairly uniformly as the total amount of assets that are in your investment accounts (stocks and shares ISA, brokerage account, SIPP, Pension etc). In my case however, I’m fairly heavily invested in Property (although I want to track more towards a 1:2). Do I declare that? How would someone actually discuss property investments in a FIRE driven portfolio?
My current situation
From a pure “Financial Statement” perspective, I have just over £1M net worth and that includes the equity in my residential property and my property investments. The split at that level looks like this:
But two caveats:
- I shouldn’t be including my Residential Property in the calculations and I haven’t mentioned it when I declared Our Numbers. I worked those figures more conservatively by taking the total equity minus my residential property to be my property net worth.
- My net worth is heavily inflated by property valuations that are currently quite high due to the low interest rates and stamp duty holiday that is pumping the UK market.
I got some questions when I posted that and I haven’t really reconciled with how to represent it properly. If I take the residential property out of the equation, I’m tracking closer to £750k.
I will do an update to the FatFIRE Number post with more detail. But in the meantime this is a quick update with where I am.
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I think your property problem comes with the territory – high property price places can help make your even richer or make you even poorer.
Leverage with care!
Thanks for the advice. I’m trying to bring the exposure to Property in a little. Hopefully 2:1. Hopefully that will reduce the risk.
There’s nothing wrong with having lots of equity in your property but all it does is reduce your interest burden and save you a lot on inputted rent but it doesn’t pay you and is illiquid – fine if you have a good future income stream.
That’s the cashflow view anyway.