House as an investment?

[RichT]

Has anybody tried entering assets like property into the investment
portfolio?

It would be useful to me if there was a way to get some performance figures
for my property investments.

 

[teabag]

Are you talking about buy-to-let?

If not, and you have a 'bog standard' house in some suburban area it may
well be possible to record asking prices for identical properties as often
as you like. However, if your house is unique you would need periodic
valuations from which to deduce its performance. If you simply guess what
the property is worth then your 'performance' will be the same as your
earlier 'guestimate'.

teabag

 

[RichT]

Are you talking about buy-to-let?

If not, and you have a 'bog standard' house in some suburban area it may
well be possible to record asking prices for identical properties as often
as you like. However, if your house is unique you would need periodic
valuations from which to deduce its performance. If you simply guess what
the property is worth then your 'performance' will be the same as your
earlier 'guestimate'.

My question was more orientated on how to set property up as an investment,
rather than the valuation method.

Ideally I would like to have a means to track the performance by inputing
annual valuations and taking into account spending on capital improvements.
Amongst the choices of investment class offered by M2005 investment setup
wizard, what might be the best to use?

 

[Ian]

If I remember correctly all I did for my house in Money was go to the
"accounts" page, select "add a new account", select the "other" radio
button, select "house".

There are two columns in the house asset account, one for asset value
increases and one for decreases. Each year on 31/12 I add a transaction to
the account using the income category "asset value increase". Unfortunately
some years it is a decrease. I base the value increase or decrease on data
from Zoopla and the tables in Moneywise.

Is that what you wanted to know?

Ian

 

[RichT]

That is how I currently do it, but it has the disadvantage of not showing
any performance data (compared to other investments) and also the price
adjustment requires a category - which makes the home page and reports
messy. I know it is possible to exclude categories from reports - but
nevertheless that too leads to complications.

Ideally I would like some way to follow property value in the investment
portfolio, taking into account capital expenditure, and yielding performance
figures. Appreciation and depreciation would then not require a category.

 

[Ian]

The way we have done it using an asset account is as intended by the
designer of Money but if you want to regard your home as an investment what
is stopping you adding it as an investment and recording the purchase a
"buy" and then manually giving it a value each year using "update prices
manually"?

Ian

 

[RichT]

I think I may have worked out a way of doing this:

1. Treat the house as a single share in a fund type investment, so on buying
the house I enter one share at price X, where X is the purchase price.
2. Any capital spent on improving the property I log as "other expense"
3.Any rental income I log as "other income".
4. Enter periodic valuations as if I was updating manually a fund price.

I am playing around with this scenario with fictitious data as it will take
a while to enter my real historical data, but so far this solution seems
realistic, and avoids having to have categories for asset appreciation which
are awkward to handle in reports.

 

[RichT]

Just as an update - I entered my historical property data using this
technique, and the results were quite interesting - I found that my property
investments hadn't actually performed as well as I had imagined, once their
costs were properly taken into account. Indeed, my market investments
largely outperformed property.

Definitely a worthwhile exercise.