Owning home and asset allocation/portfolio management

[Milu]

I'm curious for all the home owners here, do you factor your current house price or home equity into your investment portfolio decisions? Does it impact your position sizing and do you factor it into any returns calculations you are doing.

 

I've always rented and only now aged 42 decided to pull the trigger on a house, having kids and planning for schools changed my perspective on things as I was always a rent and invest type of guy before that.

 

I'll probably just keep things totally separate as a house is not exactly a liquid asset. Just curious what other on the board do?

[73 Reds]

13 minutes ago, Milu said:

I'm curious for all the home owners here, do you factor your current house price or home equity into your investment portfolio decisions? Does it impact your position sizing and do you factor it into any returns calculations you are doing.

 

I've always rented and only now aged 42 decided to pull the trigger on a house, having kids and planning for schools changed my perspective on things as I was always a rent and invest type of guy before that.

 

I'll probably just keep things totally separate as a house is not exactly a liquid asset. Just curious what other on the board do?

Nah, but has nothing to do with liquidity (most of my investments are non-liquid).  Been in the same primary residence for more than 25 years.  Didn't buy it with any expectation of making money, but rather for the neighborhood and quality of life.

[E. Nashton]

Honestly, it might sound weird, but once we bought our modest place and weren't renting anymore, a switch just flipped. Having the family home stability actually made me way more chill about getting aggressive with my investments. It felt easier—psychologically and literally—to funnel more of my extra cash into the portfolio.

Edited October 18, 2025 by E. Nashton

[Viking]

I think it makes sense to look at asset allocation and portfolio management through different lenses. Each one provides a different perspective on a very important topic. I think the basic building block to a financial plan is net worth. Another building block is an annual cash flow statement. And having some basic goals (one year and longer term). 
 

The composition of net worth is an important part of the puzzle. This includes things like pensions. 
 

It makes sense to me that an investment portfolio will be constructed in a way that it  aligns with both your life situation (net worth and cash flow) and the financial goals you have set for the year (and years).

 

PS: My wife and I are both happy renters today.

Edited October 18, 2025 by Viking

[Milu]

Yes, it an interesting thing to think about, for example let’s assume a person has a $1m portfolio invested 80% stocks (8 stocks 10% each), 10% gold, 10% tbills. 
 

Person then sells gold and tbills and uses the 200k as down payment on house, takes out mortgage of 800k. If the person ignores the house asset or home equity, they now have a 800k investment portfolio with 8 stocks, position sized at 12.5% each. 
 

The financial situation and asset weightings could either be 

- Total assets (house value + investment portfolio)

- Net worth (home equity + investment portfolio)

- Liquid assets (investment portfolio)

 

I run quite a concentrated portfolio with positions typically sized in the 5-10% range  but if I factor in the home asset value or home equity as it continues the grow, the relative size of my 5-10% position would shrink somewhat. Just some of things I’ve been thinking about as I’ve never owned real estate before or taken out mortgage debt. 

[Hsmpanl]

51 minutes ago, Milu said:

Yes, it an interesting thing to think about, for example let’s assume a person has a $1m portfolio invested 80% stocks (8 stocks 10% each), 10% gold, 10% tbills. 
 

Person then sells gold and tbills and uses the 200k as down payment on house, takes out mortgage of 800k. If the person ignores the house asset or home equity, they now have a 800k investment portfolio with 8 stocks, position sized at 12.5% each. 
 

The financial situation and asset weightings could either be 

- Total assets (house value + investment portfolio)

- Net worth (home equity + investment portfolio)

- Liquid assets (investment portfolio)

 

I run quite a concentrated portfolio with positions typically sized in the 5-10% range  but if I factor in the home asset value or home equity as it continues the grow, the relative size of my 5-10% position would shrink somewhat. Just some of things I’ve been thinking about as I’ve never owned real estate before or taken out mortgage debt. 

I view the house as an asset that can be tapped if shit hits the fan with my work or an opportunity presents itself in the market. I generally don’t view it as part of my net worth for retirement planning scenarios and view it as more a luxury expense/lifestyle choice. I own it free and clear, and having no mortgage has helped immensely with clarity of thought and ambivalence toward drawdowns so definitely helped my investment performance in that regard.

Edited October 18, 2025 by Hsmpanl

[WayWardCloud]

I used to separate my assets into three buckets on an Google Sheet : Real Estate, Passive Index Investing, and Stock picking.

Because there was nothing to say or do about the first 2 buckets I would only focus on the 3rd bucket and it took all the space in my mind.

 

A couple years ago I had a nice win on a stock. I was all proud until I realized that even though the return was great it was over such a small percentage of my actual net worth that being right had barely changed anything to my life and that I should have sized the bet much bigger.

Since then I've merged all 3 buckets into one big pie at the top of the document and that's now what I'm starring at on a daily basis.

All formatting options are just views of the mind obviously, but I believe switching to full net worth has really helped me get the right perspective.

 

It helps me intuitively keep in mind some sense of an answer to this question : When I have a big conviction, how do I size it so that it's somewhat life changing if I'm right AND so that I live to fight another day if I'm wrong?

 

 

[Castanza]

I just ignore it. You always need somewhere to live. 
 

Personally I paid my house off in my early 30’s and took the hit on opportunity cost. Not rational, but reasonable. For one it maximizes my FCF to A.) Maintain my families lifestyle B.) Reduce the psychological stress of investing / clarity of thought. C.) Less work stress

[Gregmal]

Yea so my process all along is similar what a few of the above guys have said. My first objective when getting money in my early/mid 20s was to get a house that I could raise my family in, and then write it off and the personal balance sheet. We bought a 5 bedroom home on an acre with a pool in 2013. I did not give two shits about an IRR or anything…it checked a huge box for us, it was stability. From there, I built out the investments. I bought a few rentals next where the driver was purely future, like 15-30 years down the line, stability and income. After that I built out the investment portfolio in terms of stocks. Along the way I’ve never considered the primary home as anything until I had substantial equity that could be tapped, which we did in April 2020. Shortly thereafter the investment properties also could be tapped and the rents inflected which also helped. 
 

So mainly, it’s about compartmentalization. Build your core. Have stability and comfort. Then take more risk. Then build out the quality of life stuff…for me, a boat. Along the way let the situation dictate your ability to take well calculated risks. 
 

During Covid our eyes opened to things and we started planning a move and during that our primary home, mentally was something we started viewing as an asset with optionality on the investment front. So I guess to be simple, stay mentally flexible. Today I own a bunch of homes, publicly traded stocks and bonds, and some privately held non traded investments. Have some balance but don’t be afraid to either completely write off certain stuff, or circle back and take something totally written off and use it as a platform to grow with.

[SharperDingaan]

Don't count the house/mortgage as you are only a 50% owner; it isn't your call to make. If the spouse is agreeable you might do a Smith Maneuver (Canadian thing that makes interest tax deductible), but otherwise treat it as a pension.

 

Pay into it for years until the mortgage is done, thereafter your monthly pension is mortgage/rent free accommodation until you eventually move into an old folks home.

 

You may be a great investor but you have to survive the ups and downs first. A lot less risk involved when you know you will still have a roof over your heads should you screw up.

 

SD

 

 

 

Edited October 19, 2025 by SharperDingaan

[73 Reds]

15 hours ago, Castanza said:

I just ignore it. You always need somewhere to live. 
 

Personally I paid my house off in my early 30’s and took the hit on opportunity cost. Not rational, but reasonable. For one it maximizes my FCF to A.) Maintain my families lifestyle B.) Reduce the psychological stress of investing / clarity of thought. C.) Less work stress

@Castanza You pointed out 3 reasons why paying off a house early is completely rational.  (Everything we do in life involves opportunity cost).

[Milu]

41 minutes ago, 73 Reds said:

@Castanza You pointed out 3 reasons why paying off a house early is completely rational.  (Everything we do in life involves opportunity cost).

Yup many ways to skin a cat. I'm taking the opposite approach, I built up a sizeable investment portfolio due to successful investing in my 20's and 30s. This large portfolio has given me the freedom from stress or financial worries. Now in my early 40's i am taking out long term (28 year, 3.4%) fixed rate debt that can't be margin called and am using that along with some cash savings to purchase a hard asset (house). I can comfortably afford the monthly mortgage repayments but have no intention of overpaying in order to pay off the mortgage any sooner. Any extra cash will continue to go into investments earning double digit returns vs the 3.4% return I would lock in by overpaying the mortgage.

[Marco Van Basten]

9 hours ago, Milu said:

Yup many ways to skin a cat. I'm taking the opposite approach, I built up a sizeable investment portfolio due to successful investing in my 20's and 30s. This large portfolio has given me the freedom from stress or financial worries. Now in my early 40's i am taking out long term (28 year, 3.4%) fixed rate debt that can't be margin called and am using that along with some cash savings to purchase a hard asset (house). I can comfortably afford the monthly mortgage repayments but have no intention of overpaying in order to pay off the mortgage any sooner. Any extra cash will continue to go into investments earning double digit returns vs the 3.4% return I would lock in by overpaying the mortgage.

How are you getting 3.4% 28 year mortgage?  Are you assuming an existing one?  Thank you.

[Kizion]

I also ignore it currently, only consider it in my net worth calculation that I use to simulate retirement age etc. 

 

But I look at it as hedge vs. inflation and economic slowdown. Current interest rate is 3%, however in past we've seen below 1% when global interest rates were at its lowest, so when this would happen again, I will refinance. Living in Belgium for context. 

 

vs. inflation as our salaries are automatically indexed, while mortgage payments remain fixed. 

 

vs. slowdown as there is the possibility of refinancing to a lower rate at current bank or other one. 

 

I also tried to max out the amount I could take in mortgage as it's very cheap money. 

Edited October 20, 2025 by Kizion

[Castanza]

10 hours ago, Marco Van Basten said:

How are you getting 3.4% 28 year mortgage?  Are you assuming an existing one?  Thank you.

I was also wondering this

[Castanza]

21 hours ago, 73 Reds said:

@Castanza You pointed out 3 reasons why paying off a house early is completely rational.  (Everything we do in life involves opportunity cost).

 

I get the efficiency and opportunity cost; but as with anything there is a balance to be found. Personal choice for sure, but I chose this because I realized life doesn't start when you're retired...The hyper efficiency mindset crown that seems to make up a significant portion of my generation is nothing more than a new manifestation of FOMO. That's a two way street imo. 

[Milu]

11 minutes ago, Castanza said:

I was also wondering this

I'm Irish, and that is the current rate on long term 25-30 year fixed mortgages.

 

 

[73 Reds]

18 minutes ago, Castanza said:

 

I get the efficiency and opportunity cost; but as with anything there is a balance to be found. Personal choice for sure, but I chose this because I realized life doesn't start when you're retired...The hyper efficiency mindset crown that seems to make up a significant portion of my generation is nothing more than a new manifestation of FOMO. That's a two way street imo. 

Yep.  Assumptions go into every financial decision.  The one assurance of financing and/or extending a home mortgage is the house will cost you more.

[Jaygo]

I dont factor it in at all. Net worth minus the house is the more conservative approach because you will always have an expense for a roof over your head. 

 

If you own a massive home that will be downsized than you could take that downsizing into account and factor the difference but that's too cute imo. 

 

A physical house is also a money pit and anyone acting on a purely financial basis would likely rent. Owning is far better psychologically putting money aside just for the memories etc. 

[Jaygo]

On 10/18/2025 at 10:57 PM, SharperDingaan said:

 If the spouse is agreeable you might do a Smith Maneuver (Canadian thing that makes interest tax deductible)

 

This is the best move for Canadians and almost no one does it. Literally not a single person I know has taken advantage of this and it is incredibly effective, when I tell them about it they look at me like i'm a degenerate. 

 

The big factor to me aside from saving income taxes is you are moving your risk of debasement to the lender by choosing to hold debt on your hard assets. Once you factor in the tax savings you find your break even is around 4% per year in investment gains and i'm sure most of us feel we can achieve that easily. 

 

[Castanza]

32 minutes ago, Jaygo said:

A physical house is also a money pit and anyone acting on a purely financial basis would likely rent.

 

I think that's entirely dependent on the market you live in. Most normal cost of living place this is probably not true. 

[Jaygo]

2 hours ago, Castanza said:

 

I think that's entirely dependent on the market you live in. Most normal cost of living place this is probably not true. 

 

Fair about the renting depending on the location, but not a money pit? My place is small, simple and well maintained and we still see 10k per year in repairs and maintenance. Two new basement windows just cost be $1900.00 New AC $ 7500.00 Factor in a new roof, bathroom, kitchen small reno every 6-7years and your spending a lot vs renting.

[Red Lion]

I really take two different approaches. 

 

For retirement planning, I don't count the value of the home in my "net worth", but I also factor in costs for maintenance, taxes, and insurance and obviously wouldn't factor in the full cost of renting a home. My goal would be able to retire eventually and live in my house permanently should I choose to do so. 

 

But then there's the practical value asset value of the home. It might make sense to swap homes before or during retirement, or rent it out as an investment. Home prices tend to increase a little faster than inflation over time, sometimes quite a bit more if there's population and job growth. If you're married you can get a one time 500k exclusion on capital gains taxes (or 250k if single) in the US. So buying a home (without a mortgage) would likely be a pretty safe low returning asset with added benefits of stability and permanency vs. renting. If inflation averages 2.5% and let's say the average home goes up in nominal value by 3% annually, you don't pay rent, but you do pay taxes and insurance. You're likely able to save the equivalent to 3.5-5% a year versus renting (assuming a house would probably rent at 3.5-5 CAP rate, adjust the number accordingly). So you have an asset that appreciates in a tax deferred manner by a bit above the rate of inflation, and saves you 4% a year on rent. If you're buying a house like this at 80% LTV and selling it after a few years there's a huge amount of performance drag and interest expense drag. If you're holding it as a long term core asset, it's kind of like a tax advantaged TIP with a long duration, low liquidity, and high transaction costs. There's an added optionality in the ability to pull cash out, refinance the mortgage, etc. If you can borrow money against a house at 5%, and the return is more like 7-8% between inflation/owner rental value of the home, there's a worthwhile carry to be made if you invest back into stocks/real estate/private investments at a higher rate of return.  

 

 

[SharperDingaan]

A house isn't just mortgage and maintenance (roof/siding/windows/HVAC/appliances, etc); it is also property tax/condo fees, insurance, utilities, internet, furniture and carpet replacement, psychology, etc. You either pay the cash cost to the landlord as part of the monthly rent, or pay it out of pocket as it occurs.

 

The owner knows there will be ongoing house costs (depreciation), but not how much, or when it will occur; and that there is a need to set funds asides for these future costs every month. Those with financial discipline apply the funds against a HELOC balance every month; the funds remaining available, along with an interest saving, every month. There is also recognition that if the house is to remain marketable, and command a higher price when sold; there will need to be periodic material renovations, and that a significant portion of the spend will return when the house is sold. Stress free living, and ability to enjoy the renovation upgrades. 

 

The house is also an asset that rises with inflation, financed with debt that devalues with inflation; the banker charging the borrower interest at inflation plus a spread. As long as you can pay the  interest on your mortgage .... inflation is your friend, and the higher the better!  

 

Thing is ... this isn't most people. Most will buy too much house, too early, and pay too much for it .... leaving barely enough cash to pay the mortgage, everything else hand to mouth, pray you can flip the place at a higher price, pray that nothing breaks, and run the asset into the ground. Lacking discipline, renting is often the better option ....

 

Not popular either!

 

SD

 

 

 

 

 

 

 

Edited October 20, 2025 by SharperDingaan

[Castanza]

I mean you build ZERO equity when you rent. A house should cost like 3% a year in maintenance over the long term. It’s easy enough to set aside and emergency fund park it in a a High Yield account, Bonds or even equities and come out well ahead. 
 

@SharperDingaan I agree on the most people spend way too much on their first house. I get it in some markets, but for most a house is a utility…lower mortgage frees up more cash to invest while also forcing some savings on an appreciating asset. Plus you can always leverage the equity or rent it out and move to a nice house once you build some wealth. 
 

Im not old, but my advice to people in their 20s is buy cheap vehicles and a small affordable house that is maybe 2-3x your salary or combined salary.