Tracking your net worth is one of the most important things to do on your journey to financial independence. But tracking property gets tricky….if you aren’t a real estate master.
There are mainly two schools of thought.
Basically you are taking the estimated list price from all of the major listing sites, averaging, and using that as your property value. Some tend to be high while others tend to be lower so it is the best guess if you want a realistic…ish value.
The downside being that it can be time consuming and potentially very wrong. Like many realtors will tell you, these sites don’t see the inside of the house. They can’t tell you what’s really going on inside like, if there are updated rooms and such. Also, they are just algorithms that are only as smart as what they *think* they know about the property. You can claim the property, if you make an account, and fix some of the corrections but it doesn’t fix everything.
Well this one is easy huh? What did you buy the place for? Done. Well…that’s fine except after 5, 10, 15 years…the price is very very different. You could calculate inflation and such but after a while that isn’t exactly right either.
Property tax statement (pre-deductions)
I do this because:
- I only have to do it once a year
- Less work for me
- Updated value every year
- Its slightly more accurate.
- A real person stops out at my house and they know more and more accurate information about my house.
- The person is estimating the area houses at the same time as well.
There are downsides. These can tend to be lower than real market value, unless you bought your house from foreclosure like me. This can play to your benefit though since you don’t truly know your house’s worth until someone wants to buy it. Overestimating can be far more damaging than underestimating when it comes to net worth. Your net worth can spike once a year or you can average it out over the year. It is a snapshot of your house at one given time of the market and that is your value for the entire year.
No matter what tracking, net worth is very important to making sure you are making progress on your financial journey and it helps to be consistent in how you track it.
Do you track your property values differently? What do you think of this style?