Do you keep a running tally on your net worth, month to month? If so, how do you include your home and home improvements?
I’ve used Mint to track my finances for about four years now. If you put in your real estate address(es), it will import the values from Zillow. I’ve found that these values may be a good start, but not close to accurate. Zillow’s Zestimate is also prone to wide swings month-to-month. But I don’t think the value of my house swings $50-75,000 a month.
In addition to Mint, I have a spreadsheet that I’ve been using for 10 plus years now. When I started tracking net worth, it was in the middle of the real estate downturn and well, ignorance is bliss. So I just left it at purchase price for the entire time. Even now that it has turned into a rental property, I’m not tracking depreciation on it, at least not for net worth purposes. I haven’t put much money into remodeling or other major projects beyond normal maintenance (even that air conditioning unit I just chalked up to maintenance).
I had to get an appraisal when I did the refinance to lock in the historically low mortgage rates. The value of my home had increased dramatically and since I had something tangible, the appraisal report, I updated my home’s value.
But now, on my new home, I’m getting into the major remodel phase. Because my kitchen has laminate countertops. And my master bathroom has carpet.
Which leads me to my question – how do you track home improvements in your net worth? I’m obviously exchanging cash for a higher value home. I don’t want to just remove cash and ignore the increased value of the home… I think that will distort my net worth progress.
Some things I’ve considered, for net worth calculation purposes:
- Ignore major remodels in the value of my home
- Increase the home value by what I put into it for major remodels (exclude maintenance issues)
- Increase home value by a percentage of what I pay for the remodel (assuming some falls into maintenance issues)
- Your ideas???
I tend to be conservative on real estate valuations because they are not exactly liquid assets and there is a cost in the time to use the assets, if needed. Not to mention, cost to sell, including maintenance/remodel issues at time of sale or reduced sales price.
Let Me Know How You Calculate Home Improvements in Your Net Worth
Comment below to give me some ideas on how I should treat major home improvements and remodels in my net worth calculations!