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Updated over 9 years ago on . Most recent reply

User Stats

80
Posts
16
Votes
Glenn Mayo
  • Fort Worth, TX
16
Votes |
80
Posts

A kind of odd question concerning net worth

Glenn Mayo
  • Fort Worth, TX
Posted

Ok, so, this may seem a little odd, but I was having a discussion with my mother about how you'd calculate your net worth with your real estate. Now, I understand that the basic formula for net worth is Net Worth = Assets - Liabilities, but the question was, in what way do you use your real estate as assets? The way I see it, there are 3 main ways to look at an income-producing property as an asset: 1. you could count the amount of income it's producing as the value of the asset, 2. you could count the amount of equity you have in the property as the value of the asset, or 3. you could count the fair market value of the property as the value of the asset. I suppose there are also hybrid ways to do it, and you'd probably use different ways for different circumstances, but when sitting down, for yourself, to calculate your net worth, what is the PROPER method? Is there a proper method? Kind of a strange question, I know, but I figured it never hurts to ask.

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