<![CDATA[What Percentage Of Your Net Worth Is In RE? – “I’m 38 with a net worth of about 1.4 million… 700k in real estate.”]]>Valyrian Steel at greaterfool.ca 3 Apr 2011 8:45pm – “I’m 38 with a net worth of about 1.4 million… 700k in real estate (Vancouver condo + Gulf Island acreage), so according to Garth, right where I should be. [Turner gave an equation recommending ’90 – age = percentage of net-worth in RE’.] As my property is all paid for, I manage to sock away about 5k per month in savings/investments, so my real estate ratio is actually dropping significantly. Not everybody in Vancouver is financially moronic.”

This individual has 50% of net-worth in RE. They will weather a crash okay; not great (they risk losing more than 25% of net-worth), but okay. But there are many others who will do far, far worse because of considerably greater exposure and leverage.
Regular readers of this blog know that we believe that the question “What percentage of your net-worth is in RE?” is seminal.
We tried to poll people about this exact question 2 years ago [“How Exposed Are You To The Vancouver Real Estate Market?”, 19 April 2009] and got a whopping two responses, both of which were from renters with 0% exposure. Perhaps it’s time for another try.
The net-worth question also relates to a recent discussion, where we shared our opinion that being exposed up to 25% of net-worth in ones primary residence may be reasonable, regardless of bubble-risk. That is because the risk of loss of 10-15% of net-worth may, for some, be worth the convenience of owning. The problem is that only a very small minority of people are wealthy enough to be able to stake that low a percentage of their net-worth on a property that they at the same time are happy residing in.
Anybody care to share?:
“What percentage of your net worth is currently in RE?”
10%? 20%? 40%? 75%? 120%? 400%? 500%?? – vreaa

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