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How Do You Include Home Improvements in Your Net Worth? - 80/20 Your Finances Skip to main content

How Do You Include Home Improvements in Your Net Worth?

Do you keep a running tally on your net worth, month to month? If so, how do you include your home and home improvements?
How do you include home improvements in your net worth?
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???

How do you include home improvements in your net worth calculations?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!

4 thoughts on “How Do You Include Home Improvements in Your Net Worth?

  1. From my standpoint that’s too much work 😉 I actually just talked about how I just use property tax assessment for my house networth.

    It’s one of those hard to calculate values that I’d rather just simplify it than try to be extremely accurate.

    1. I like keeping it simple too. But our tax assessments can be way off here. It’s more of a “we need to collect this much revenue” so they back into the numbers for the house value. So I don’t like using them.

      Typically, I just leave it at the last appraised value (purchase or now refinance appraisal). But since I’m using cash for the remodels, well, my net worth isn’t going down those months even though my cash is. It’s more of a mental thing – not wanting to see my net worth going down on the spreadsheet. It’s one thing in a down stock market and my investments go down. But when you are investing in the house… see my dilemma?

  2. If you want to “feel better” about your remodeling, you could use percentages of remodel costs as found at some sites. OTOH, we completely redid 3 bathrooms (dated to the 1960s, moldy and only 1 of the bathrooms was functional) and when called home insurance company about possibly upping coverage due to that, they said they considered it “routine maintenance” and wouldn’t up the coverage (esp. since floor area didn’t change). BUT, the city was more than happy to assess the house higher so our property taxes went up 11%

    So….no easy answer. We still just use purchase price though comparable sales currently in our neighborhood would peg our house as having gone up almost 70% in the last 10 yrs.

    1. That’s odd that your insurance company wouldn’t up your coverage. I casually mentioned it to my agent that I would begin renovations soon and they have been all over me about upping my coverage.

      The city/county tax assessor will always be happy to up your property tax bill. 🙂

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