Your House: Asset or Liability?

It is a question that is brought up often. Whether by financial professionals or in your day to day conversation. Is it best to spend my focus on investing in my home? Isn't this my best Asset? What is an Asset? What is a liability? We address this and how it can help or hinder you in the long run.

Also there's dad jokes, because when are there not dad jokes?

Transcript

Chris Holling: 0:00

Okay, huh? joke jokes, jokes, jokes, jokes. I asked my date to meet me at the gym and she never showed up. Guess the two of us aren't going to work out.

Sean Cooper: 0:20

straightforward, but I like that one.

Chris Holling: 0:23

Yeah. What's the longest word in the dictionary?

Sean Cooper: 0:31

Pneumonoultramicroscopicsilicovolcanoconiosis. Sorry, you wanted a funny answer. I give you the littleral answer.

Chris Holling: 0:42

That's, that's actually the longest word, isn't it?

Sean Cooper: 0:44

Yeah, I'm pretty sure.

Chris Holling: 0:47

No, but good guess. The longest word is smiles. Because there's a mile between two s's

Sean Cooper: 0:56

Good. Yeah.

Chris Holling: 0:57

Yeah. Uh, needless to say, I believe I won.

Sean Cooper: 1:02

Oh, Ok I'll let you have it.

Chris Holling: 1:21

Words, words, words, words. Welcome. Welcome back. Everyone, ladies and gentlemen, boys and girls of all ages, but mostly in the working class stretch of age range. to another episode of the truth about investing back to basics. My name is Chris Holling.

Sean Cooper: 1:38

And I'm Sean Cooper.

Chris Holling: 1:40

Today, we want to talk about liquid assets, I think is the title that we that we're officially going with here

Sean Cooper: 1:49

Which is ironic, because I think a lot of what you want to talk about is actually an illiquid asset.

Chris Holling: 1:55

Yeah, cuz I totally know what that means.

Sean Cooper: 1:59

Not only to say,

Chris Holling: 2:00

like, the,

Sean Cooper: 2:04

the opposite of liquid.

Chris Holling: 2:06

Yeah, you're right. Okay. Well, I'll tell you what, when when we make this this whole process when we make our our syllabus, I think we call it, we really just kind of go through stuff like, Oh, yeah, we should touch on this topic and this topic in this topic, and I write it down. And I put it in a way that I can remember stuff. And the one that I put this one down is, but but my house will be paid off. And I've been told it's my best asset. And that's, that's that's the category which is, which is why it's liquid assets. So

Sean Cooper: 2:36

Or illiquid assets as the case, may

Chris Holling: 2:39

illiquid, illiquid assets as we just come to learn. So that, I guess I can just kind of hit on on what I wanted to address, because this really is a conversation that I wind up having pretty consistently with people usually it's people at work, but it's just with with friends and different people that pass and I, Sean and I have kind of talked about this somewhat passively. And if we if we're able to kind of lead into what else it's attached to. And I think that that's a good way to go. If that's cryptic enough for you. So So when people talk to me about assets, there's there's something that I feel like maybe we've addressed on a previous episode, I'm almost positive we have is, is when you're looking at assets versus liabilities to me and really like please jump in after me, Sean somewhere in here. Yeah. But when you're looking at assets versus liabilities, to me is an asset is something that you purchase that makes you money as an asset, and then one that will cost you money after your purchase is a liability. And if you if you have that division at that point, then you're looking at like I think a vehicle is a prime example of a liability. You purchase the vehicle you have to pay for maintenance on the vehicle, you have to pay for maintenance on the insurance, and the vehicle is going to depreciate and it depreciates people say it What is that like drops 50% in value when you drive it off the lot if you buy a new one or something along those lines, like it's, it's a it's something that has value that you are going to continue to put money into it. If you maybe make the argument that you purchase the vehicle say say you know that this was that that cybertruck that Tesla truck, if somehow you're from the future, and you know having one of the original cyber trucks that comes off the line is going to be worth mountains of money because there's so few of them in rarity and you purchase it today and you put it away somewhere so that you can hang on to it and then you sell it later at a higher value. Because you weren't driving it You were really just purchasing it as a As a collection at that point, then that could be more of an asset than a liability. I think that's the first thing that I should hit on before I kind of get away from that. Where do you sit on those things?

Sean Cooper: 5:14

No, I think it's a good idea that you defined it. Because typically, when I think of asset versus, I mean, not necessarily. I don't I don't necessarily think of asset versus liability so much as asset versus debt, although for me, yeah, I think of it from more of an accounting standpoint, a balance sheet standpoint. So an asset is, you know, anything on the books that has a value that could be potentially sold. So the car would technically be an asset from that standpoint, as well, like a house, now, you often have a loan, offsetting it, and that would be your your liability in that standpoint. So if you have a $10,000 car and a$7,000 loan than your, the, the impact on your net worth is$3,000. So the difference, so I think it's good that we're defining asset in this standpoint, as something that can be productive for you, as opposed to being a potential liability to you, as you're defining it. So

Chris Holling: 6:17

yeah, I'm really glad that we're touching on that. So because to me, and then just clarifying what you're saying, because this is this is also the kind of the understanding that I've had is that there's a broad term like a textbook term, and I believe that's what you're touching on of what an asset is,

Sean Cooper: 6:33

right

Chris Holling: 6:33

And so when people say, let's, let's list your assets, then it can be something like your home, it can be something like your vehicle, because ultimately, when you're having your assets evaluated as as a whole of what it's, it's a matter of, should we loan this to you usually, should we loan this money to you, because Can you pay us back, because you have X amount of value in other things, is assets to them. But when we're trying to look, and maybe this is more of a philosophical view, as a whole, when we're trying to look moving forward, have you want to make sure that you are purchasing assets for your longevity, then that's when you're looking for things that are going to work for you. So that asset versus a liability as a whole is kind of what we shoot for, as a whole. If that, is that, is that fair? Is that?

Sean Cooper: 7:27

Yeah, you're shooting to define asset as something that can provide growth to your net worth, as opposed to just being part of your net worth. Because in my example, the car, if I have$3,000, in cash, and I go out and buy that $10,000 car, my assets, my cash has gone down by 3000. And simultaneously up by 10,000 the car and got then my liabilities have gone up by 7000. Thus, I net, my net worth has not changed, it's still that$3,000 that I started with in cash. Whereas here we're talking about something that can actually provide growth to your net worth. So investing in a company or you start a restaurant, or you go out and invest in education that can get you a higher paying job, those types of things are what you're viewing as an asset to your the growth of your net worth the growth of your capital.

Chris Holling: 8:33

Yes, exactly. And that's, that's actually, I mean, I'm really glad that we're covering on this, because when when I have this listed on here, as the I've been told my house is my best asset by Sean's textbook definition that we're going off of, it absolutely can be one of the largest assets to to your books, labeling wise, but when we're talking about building something that is built for growth, and for your long term, net worth, and really, to me, the ability to move forward more efficiently, and you're looking at homes, then people like to consider a home as an asset, mainly because of the appreciation, oh, if I get this home, in this location, then the value is going to increase. And it's going to be worth this much more money. Which is true. There's there's no part of me that says that that doesn't want to happen. But something that I really want to address on here is that I feel like people don't consider things the way that they should when they're looking at this. Because what I've had several times oh well if I get this home, I can't I can't get this, you know, $500,000 house that I want to buy right now. So instead I'm going to get this house that's 250,000 because I can afford that. And then you know down the road when when I got more money into this$250,000 house and then it's going to increase you know, it's going to double, I know that this is going to double and then that $250,000 house is worth$500,000. And, hey, you know what, when I, when I make it, you know, 30 years down the road and I've got my mortgage paid off, then I'm just going to slide over to that house that I really want. And I'm paying into this house, because the appreciation I've got, well, your house did double, it did go from 250,000, to 500,000. But that home that you want to get to doubled from 500,000, to a million. And if you're looking at things like that, as a well, I'm going to put into this so that I can go purchase this down the road, it it doesn't work, if it's what would be considered a lateral move, if you are going from the same spot to the same spot that's down the block, then that value is also going to increase in the process. So if you are looking into I'm going to dump all of my money into this category, that that is an asset to me, which is my house, because it's going to appreciate because then I'm going to get this more expensive house down the road, that is also going to increase in price down the road. And you were in this definition, purchasing a liability in order to have a larger down payment for a larger liability down the road. Because both circumstances are going to be something that you are putting money into that you will have to pay for that you will have things that will come up like repairs, unless you're purchasing this home to be rented out. Or you're purchasing this home because part of it's going to be an Airbnb, or you have some arrangement where where you are able to use this for business, that cash flow, that's able to start working in that category, that home then becomes an asset at that point. And if you're not doing it that way, and you're just living in it, and it appreciates, and then you sell the home to move to another home. But you move from New York City to Dayton, Ohio, well, that's different, because then you would be not making a lateral move in the same area because the the amount of cost for housing in that area increased at different rates and is worth different values. And so you might get that bigger home that's worth a certain amount that you got due to utilizing the appreciation of the home, but you're not using that appreciation to move next door to another house that appreciated at the same time, which is why Denver such a hot market, honestly involving real estate, is when you have places like California, New York, the oil and gas money from Texas, you have really expensive homes and cash floating around. And then people will come to the Denver area and say, Hey, I'll pay cash. I'll handle this right now. Yeah, I had this condo that was worth a million dollars in California. That was a you know, one bedroom, one bath, of course, I'll take your four bed, three bath $500,000 house in the suburbs. And that's because they're they're able to make that move from place to place. And it's not as much of a lateral move. Was that was that convoluted? Or did I did I hit on that? Did I go all over the place? I felt like I just kind of jumped everywhere.

Sean Cooper: 13:07

No, I thought it was solid. There are two things I would add that you touched on are number one, the appreciation and number two, the liquidity factor.

Chris Holling: 13:16

Yeah.

Sean Cooper: 13:16

So first off in regard to the appreciation, housing prices, so all these people that think you can you know, buy a house and then later it will be worth way, way more money or, you know, the the people that want to flip a house or, you know, in some instances, they just want to buy it hold on to it for a year, and then they can sell it for more than next year, which currently and in the recent history has been true, because lately we're having, you know, double digit appreciation in most markets. And but the growth that we've experienced over the last few years is largely or predominantly fueled by really low interest rates.

Chris Holling: 13:54

Sure.

Sean Cooper: 13:56

And then if you look, prior to that, you know, leading up to like 2007, that growth in the housing market was predominantly fueled by different forms of government regulation. So as opposed to controlling interest rates, you know, you're looking at the Affordable Housing Act from 1992. And a variety of additional regulations that occurred after that, that basically spurred the the housing market on leading all the way up to 2007. If you look at it from a longer historical standpoint, real property appreciation averages only about three and a half percent annually. Which, when you consider inflation 3.1 it's, it's not really that great of an inflation hedge. So just something along the lines of the the appreciation to put it into perspective, because I feel like people look, they latch on to what's happened most recently and assume that that's going to continue on and that's not necessarily the case. The other aspect you mentioned was the liquidity. And you're talking about this idea of, you know, moving laterally, you know, if you've just moved down the block, it doesn't really help you unless, of course, you happen to be sitting like, right on the, the line where, you know, across the street, you

Chris Holling: 15:18

Oh sure different cities.

Sean Cooper: 15:20

You move into...Yeah, yeah, you move into a different area that is, you know, rundown or something along those lines. But in general terms, yeah, if you move down the block, you're not really helping yourself out. Whereas if you move from, you know, an entirely different city in a different state with very different demographics, in terms of housing, that makes a big difference. But all of that kind of lends itself to the liquidity factor in this in looking at the house as an asset. Yes, it is an asset from my definition of the term. But that asset is only the equity that you've built up that asset is only accessible if you either a) sell the home, or b) take out some kind of loan on it. You know, HELOC home equity line of credit, second mortgage or a reverse mortgage, something along those lines. Otherwise, that that asset, that equity, doesn't mean a whole heck of a lot unless you just or your goal is to pass it on to your heirs. And then yeah, they can have that asset. But for your your personal finances, it doesn't. It doesn't mean a whole lot from that standpoint as an asset. Because it's illiquid. So anyway.

Chris Holling: 16:40

No, I think those are, those are great points. And, and this, this all came about, and maybe I should have started with this. But this all came about because specifically I was having a conversation with some people the other day that and you're mention to the low mortgage rate made me think of it specifically is that somebody was talking about, Hey, I'm thinking about That would have been way more fun, though. buying a house, I've been thinking about buying a house for a while. And this was this is a few weeks ago, when when we we still had active 2% mortgage rates, which I think they're in the threes now again. But while we were talking about it, one of the pieces of advice that started floating around was somebody that had had a home for, I believe, 20 or so years in the Denver Metro area. So okay, I'll tell you exactly what you should do, what you should do, is that because the mortgage rates are the lowest that they've ever been in, in the history of anything, then what you need to do is you need to buy the absolute biggest house that you can, because this is, this is going to be the lowest mortgage rate that you'll ever see. And you'll never have advantage of it again. And, and it's practically free money, man, because if you got it at 4%, then you would have had that much less value in the house when you bought it. So instead, you should get this really big house and just kind of bite the bullet on trying to take care of your your mortgage that way, because you're gonna make more money that way, because the mortgage rate is low. And that was the advice that was given. And I personally have a big Oh, I issue with it. him and I, we, we had a conversation, the guy t know. I know, I just I was we were arguing all week in the at was asking about homes, we talked about it at a m ch different length later n, because I didn't want to j st create a big stir in this v ry solid straightforward adv ce that was coming throu first place. So I don't need to anyway. And, and the The fact is, is that i i honestly understand why he feels that way. I really do. Because if you come from a point where you've seen mortgages that are at, say, 12% and then they start to drop over the years, and they hold that four to six, and then they go to three and then you see it at this 2% which is just unheard of, then yeah, if the if the advice that you've been given previously in your life is early on that you need to purchase a home and you need to put your money into your home because it's your best asset, then of course that advice makes sense. But it's it's not the thing that you need to consider about you because that the fact of the matter is still to me from a personal finance standpoint, you need to make sure that you are taking care of yourself and the cash flow and going back to our second season we're talking about framework when when you are doing these things and go Okay, I'm I'm gonna take the extra money that I make and pay for this huge mortgage that I just took on because I got it at two point something percent. That that takes money away from where you might be able to put it elsewhere. Whether it's because you feel that you have other important things in your life or just a fact of taking that money. Putting it towards something else helping helping start a business putting it towards calling, calling up Sean and saying, Hey, can you get me a better mortgage rate than or excuse me, would you be able to get a better interest rate, if I start investing with you than if I put extra money into this, this mortgage that I have, like, there, there are other avenues to go that aren't just I'm going to take on this big bill, this big mortgage, and ultimately, the term is house poor. You know, having having this land barren status. And, and working yourself to death for this home that you know you like and is bigger, that is nice. But all based off of, to me poor advice, there's, there's no reason to tie yourself down to something like that. And especially, especially, if you are putting into this, where you're just working extra hard to be able to afford this, this low interest rate mortgage that you have, just to sell the home later to make a lateral move to another house down the road. really doesn't make sense to me. Because the reason that you invest the reason that you have a framework and a and a certain setup is so that you can live your life the way that you want to. And, and not just taking on to me more liabilities, because you're getting bad investment advice.

Sean Cooper: 21:25

Yeah, I would have. To add to that, I would say his advice isn't. The friend's advice isn't bad. It's not great, but it's not bad. And the reason being is it's all of this, it can't be done as a blanket advice, everybody should do this, or nobody should do this. It's it's all relative. And what I mean by that is, if you are looking at a home purchase relative to renting, okay, then we have to evaluate, what are you paying in rent, what is your mortgage going to be? What is the interest rate going to be, and actually comparing that to see what it does to your finances. If your rent and your mortgage are going to be identical, then it's a pretty good chance that you're better off with the mortgage.

Chris Holling: 22:16

Sure,

Sean Cooper: 22:17

because at least then you're building some equity. Now, if your rent is going to be significantly lower than your mortgages, then you really got to start crunching the numbers, because you got to see how that pans out on you

Chris Holling: 22:26

Yeah, know, if if I continue to pay rent? How much of this extra money that I would have been putting into a mortgage? Could I be saving? And would I make more on that, that money if I invested it, which is kind of what Chris has been getting at here, would I make more on that money investing it, then what I'm going to build up in equity in the home, plus, there's a liquidity factor of is this investment going to be more liquid than the house and things along those lines. So if you you incorporate that idea that the appreciation on the house is,

Sean Cooper: 23:00

the reason I threw out 4% is it wasn't as much of a you know, a long term average about three and a half percent, whereas you could invest it and provided your your risk tolerance, your ability to assume risk, your willingness to assume risk affords you the the opportunity to invest more aggressively and earn more than three and a half percent, then it might be a situation where you'd actually be better off just investing the difference and continuing to rent. Now, in all fairness, I haven't actually seen that pan out in real numbers. But the point is, you need to take the time to evaluate the options to determine what's going to be your best bet. The other things that you can you want to look at in terms of the you know, the rent versus mortgage is some of these ideas that we've already talked about of inflation and taxes. Because if you consider the fact that inflation averages roughly 3, 3.1% if you're paying a mortgage at say, 4% then in practical terms 3% of that 4% interest is kind of being taken up by inflation. In other words, you're paying them back with money that's not worth as much as it was when you borrowed it. So it was more more to you than it was to them. That 3% portion anyway, up to 3%. Rather, I should say. factor in the last couple years because the the Trump tax cuts increased the standard deduction so much that most people were taking the standard deduction instead of itemizing. But now that the standard deduction has been lowered again, I think they cut it by about a third. So they took about a third of it off. More people are going to be itemizing. So this other factor becomes a Larger player. And that is the interest you pay on your mortgage of a primary residence that is, is actually tax deductible up to a certain amount. So up to a certain amount of mortgage. And so say you, for example, you're in a tax bracket were right around, say 25%, then effectively your, the interest you're paying, is reducing your taxes in such a way as to offset roughly 1% of the interest you're paying on your taxes. So that's why I mentioned the 4%, because you've got roughly 3% being eaten up by inflation and another 1% being eaten up by tax deduction. So it can eat up roughly 4% of an interest rate on a mortgage. So that actually lends itself to having a mortgage as opposed to renting. At least conceptually.

Chris Holling: 25:53

Sure. And that's interesting. those are those are definitely some variations that I didn't even consider, which I'm glad that we touched on inflation and interest rate before this for for those reasons.

Sean Cooper: 26:03

Exactly. The other thing is, again, because it is relative, what I was talking about there is renting versus buying, if you're talking about buying x versus buying x plus 100,000, you know, getting at the idea of buying something much bigger, simply because interest rates are low, that that whole relativity thing gets kind of thrown out the window, and you're not really helping yourself.

Chris Holling: 26:30

Right. And unless, you know, like we were trying to address or I was maybe trying to address earlier, that if your goal because this is a case by case basis, if your goal is to be in a circumstance where you are in, say LA, New York, and you are trying to be there for a couple of years, but then you're leaving to go to a certain area. And you're making that active choice that okay, I could rent here for a while or I could build up some equity in the process. And take some of this with me, I had somebody that just recently did that they left the Denver Metro area to go out to Iowa and essentially half of their home was paid for when they got out there because of the way the market is out here and the amount that the value of the homes are out here. And then when he moved, you know, it worked well in his favor. And so if you're making an active choice for it, because that is that's your prerogative, that's how you built things moving forward, then, then that's that's a good decision where it might not be for, for someone else.

Sean Cooper: 27:31

As I talked. Yeah, we briefly talked about the illiquidity of a home unless you sell it, you can't really access those assets. The alternative being taking out an additional loan of some sort, whether it's a HELOC, which is home equity line of credit. So you, you basically take out, you use a portion of the home, so say you have 100,000 in equity in the home, you take out 50 of that as a home equity line of credit. So you're not actually you don't necessarily touch it, you just have that line of credit. And that's what it is. And then at some point, you decide you want to use it to remodel the kitchen. So you take out 20 grand, okay, so you pay interest on that, and you even pay it back off over time, you still have that line of line of credit, so it provides some liquidity, but you are going to pay interest on it. And you're gonna have to, I mean, the goal is to eventually pay back the balance as well, plus, you're still paying your original mortgage. Alternatively, you could take out a second mortgage or refinance and take out cash in the process. Same basic concept, except in that scenario, instead of only paying on what you've borrowed, you've actually already borrowed the, you know, whatever extra amount is, and then you're paying the interest and the the principal on all of it. And then the final example, and this is what people tend to get into as they get older in terms of accessing the liquidity in their home, or the equity in their home, I should say, is a reverse mortgage, which is more or less exactly what it sounds like, instead of you paying the mortgage, and gradually buying the house from the bank, the bank is effectively buying the house back from you. Typically, it's not the same bank, because it's different banks that offer reverse mortgages, but that is more or less what they are doing. Now they can do a lump sum and they just, you know, pay you a lump sum and at that point, you get to continue living in the house. But for all intents and purposes, it's the the bank at that point basically owns it, if you will, the your heirs have the option to buy it back when you pass away. Which is always the case with a reverse mortgage. But the other option is to have payments for a set period like 10 years or Have it payments for your lifetime. And basically the bank is you've turned off your mortgage payment to the bank. And now the bank is actually or different bank, I should say, most likely is paying you for your house. So gradually buying the equity back from you at a set interest rate. And there's... go ahead.

Chris Holling: 30:25

I was just gonna say that's, that's something that was somewhat newer to me to learn about. And it's, it's, it's good to be aware of to know how they work, just like Sean was addressing on on the ins and outs of how they work. Because that's, I feel like not how it's approached, not how it's explained, at least with the few that I've spoken with that they get involved with reverse mortgages, because the way it was presented to them was very much in the aspect of, well, we will give you money for your home, and you don't have to worry about mortgage stuff anymore, because you have so much value in your home that you're basically just living off the appreciation is the way that it's been explained to them. Oh,

Sean Cooper: 31:11

that is how I've almost always heard it explained.

Chris Holling: 31:14

That's how you've always heard it explained

Sean Cooper: 31:15

pretty much. Yeah,

Chris Holling: 31:16

yeah. And, and it's unfortunate, because it really, it's really not that simple. Because the the amount that that does get utilized is is the amount that that the bank needs to retain ownership for it in order to pay that money back to you. And, and so it's it's something that you really have to make sure that you're taking into consideration before taking on something like a reverse mortgage, because you need to ask yourself would would I be better off having a certain amount of, of money invested to gain dividends back to to have some form of interest from to help us pay for our mortgage to help us pay for our day to day to help us pay for these things, rather than essentially selling off your house? early? I guess is the best way to say it. And just making sure that you're evaluating these things, I kind of live under the guise of you know, you don't you don't ask a life insurance salesman whether or not you need life insurance. You know. And so if you're talking to somebody that specializes in reverse mortgages, then you know, maybe maybe also address it with somebody else. Just there's nothing wrong with second opinions. But if you're only speaking to somebody about whether or not a reverse mortgage is good, and they happen to sell reverse mortgages, then then speak with, you know, maybe your your neighborhood friendly asset manager, that that might be a good, a good start somewhere.

Sean Cooper: 32:51

Yeah, the notion is nice that your appreciation in your home will offset the interest that accrues on the reverse mortgage. In practical purposes, that's not always the case. In fact, they ran into a lot of issues where the early phases of reverse mortgages where, basically the equity was all eaten up, and then the bank was trying to take back the house, and then people were being evicted. And we're talking about people. So reverse mortgages, or I believe the restriction is you have to be 62. to qualify. So we're talking about retirees for the most part that are being were being evicted. And so the government stepped in and created all forms of regulation on it. And so now the the they, they cannot take the house until after the people have passed away. And they still have to give the opportunity to the heirs to buy the house back if they choose. But they have to pay the whole thing back basically upfront. And

Chris Holling: 33:52

is it the value at which they signed for the reverse mortgage? Or is it like current market rates? If if that happens? You know,

Sean Cooper: 34:01

that is a great question. Because the the reverse mortgage is going to be the the equity in the home and the the property value is actually reassessed over time.

Chris Holling: 34:16

Because they're trying to utilize the appreciation. So market.

Sean Cooper: 34:19

Yeah. So it's going to be fairly close to market. I mean, it's effectively what's what's going to be owed. Yeah. So yeah, you can, yeah, it could get get up there. The nice thing about that is now they can't take the house back. And if it's on a lifetime payment, they have to continue paying even after the equity is eaten up, they still have to pay that that monthly or quarterly or annual amount that they have committed to for the person's life. So it does create kind of a lifetime lifetime annuity there. Because of those restrictions. The payout on them tends to be less. And there are also lots of limits on how it's done. So for example, you have to I believe, depending on which group you're in, which reverse mortgage lender you're dealing with, typically they need at least 50% of the home to have been paid off. So you need at least 50% of the value of the home in equity to even qualify, and then you're never going to be able to take out like the full amount of what it is, it's actually quite a bit less than that. So you're you're committing to basically this plan of them gradually buying the house back from you. But with only a fraction of the house, if that makes any sense. So it the payouts on them are not as significant as they used to be. There are certainly situations where it makes a lot of sense for somebody to do so because they're in a tight situation. But you still want to evaluate it really, really closely.

Chris Holling: 35:57

And it's it's also I guess, it probably is case by case basis, but it's it's not something that is made to have to pay as adjustment for inflation, either correct. Usually, it's going to be a this is what you're paid each month.

Sean Cooper: 36:09

Right

Chris Holling: 36:09

Till until the end of life,

Sean Cooper: 36:11

right? Yeah, typically, yeah, you might be able to find one that does adjust for inflation. And certainly, that's part of the the notion of this idea of the interest or your equity or your property value increasing is that will help can help increase the payment over time or allow you to increase the payment, because some of them also have the option of not only a set payment, but you have an additional line of credit in there as well to take extra. And you can use that based on the appreciation or at least that that's conceptually, what the idea is there to help offset inflation. So

Chris Holling: 36:52

yeah, so the are the these are, these are a bunch of options, a bunch of it's just a bunch of considerations when you're looking at liquid when you're looking at illiquid, when you're looking at what you want to do long term. purchasing a home is, is a common thing to do and can be an asset by textbook or a liability by philosophical view.

Sean Cooper: 37:15

Right

Chris Holling: 37:16

Or, or an actual asset as a whole of something that can make you money in the long haul. It's it's just no different than than other things that we've addressed before is that it's a matter of finding out what is important to you, and what works well for you and more tools for the toolbox. But these things won't work for you unless you understand them, which is why I think it's it's really good and important that we've we've started touching on some of these things. And we'll go into some of that a little bit further. Our next episode is actually going to be talking about debt versus ownership. And I imagine we're going to start touching on some of that when it gets into homes anyway, because that's, that's some of the things that we're starting to address in here. Anyway, is there anything else that that we should make sure we touch on in here?

Sean Cooper: 38:03

No, I think you summed it up pretty good. Yeah, the home can be an asset, it can certainly be a something that you you pass to your heirs. And there's some tax advantages in that regard in terms of step up in basis and that kind of thing, but which all may be changing, we'll see.

Chris Holling: 38:21

Yeah,

Sean Cooper: 38:21

but it's something you want to evaluate, you know, How valuable is it? How important is it terms of your overall plans for your investing? it's all relative, so something to be evaluated, for sure.

Chris Holling: 38:37

Absolutely. Well, thank you again, for joining us today on the truth about investing back to basics. Thank you for taking the time to want to learn to better yourself on a day to day measure, because I think that that's sometimes a lost skill. So thank you again for joining us today. My name is Chris Holing and I'm Sean Cooper, and we will catch you on the next episode. podcast disclaimer disclaimer. The disclaimer following this disclaimer is the disclaimer that is required for this podcast to be up and running and fully functioning and moving forward. This is going to be the same disclaimer that you will hear in each one of our episodes. We hope you enjoy it just as much as we enjoyed making it.

Sean Cooper: 39:33

All content on this podcast and accompanying transcript is for information purposes only. opinions expressed here in by Sean Cooper are solely those of fit financial consulting LLC unless otherwise specifically cited. Chris Holling is not affiliated with fit financial consulting, LLC nor do the views expressed by Chris Holling represent the views of Fit financial consulting LLC. This podcast is intended to be used in its entirety, any other use beyond its author's intent distribution or copying of the contents of this podcast is strictly prohibited. Nothing in this podcast is intended as legal accounting or tax advice, and is for informational purposes only. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. This podcast may reference links to websites for the convenience of our users. Our firm has no control over the accuracy or content of these other websites. advisory services are offered through financial consulting LLC, an investment advisor firm registered in the states of Washington in Colorado. The presence of this podcast on the internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute, follow up or individualized responses to consumers in a particular state by our firm in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant to an applicable state exemption for information concerning the status or disciplinary history of a broker dealer, investment advisor or their representatives. The consumer should contact their state securities administrator.

Chris Holling: 41:15

I was like that as a kid growing up toys yeah there's there's a video of me where I'm, I'm in a in a playpen with a friend of mine that I was growing up with. And you see there's five toys on my side. And she has a toy by her and she picks it up and starts like hitting the the side of the playpen with it. And I walk over to her and I grab it and I take it and I go back over to my pile of the rest of my toys and play with them. She's just sitting.

Sean Cooper: 41:44

At least you played with them. I've seen children that will you know just put it in their pile of toys and sit there and gard it as opposed to