A House Is a Store of Value, Not a Paycheck
A store of value is something that keeps its worth over time.
Picture a couple named Fred and Connie, 70 and 68. Their house is paid off and worth about US$500,000. Fred keeps a framed photo of it from the year they bought it. "The house is our savings," he said. "It is the steadiest money we have."
A store of value is something that keeps its worth over time. A paycheck is money that arrives on a date. A house is the first kind.
Connie asked Fred a question while she was drying a plate. "How much did the house send us last year?"
"It is worth five hundred thousand," Fred said.
"I asked what it sent."
Fred did not answer right away. Then he got a pencil. He said the house gave them a home, and Connie asked what that home was worth. A home like it would rent for about US$3,000 a month, or US$36,000 a year. So they wrote two tables, one for the years they live in it and one for the years it would sit empty.
While they live in it. They compare the house with the same value held as sale money, and with renting a home like it.
| Per year | Live in the house | Sell, rent a home like it |
|---|---|---|
| Value held | US$500,000 | US$470,000 (after 6% selling costs) |
| Money it sends each year | US$0 | US$18,800 (at an assumed 4%) |
| The bills | −US$14,900 | −US$38,400 (US$36,000 rent and US$2,400 utilities) |
| Left over | −US$14,900 | −US$19,600 |
"So while we live in it, the house costs less than renting the same home," Connie said. "About US$4,700 a year less."
While it sits empty. They had planned to spend most of the year abroad.
| Per year | Leave it empty | Rent it out | Sell it |
|---|---|---|---|
| Money it sends | US$0 | US$33,000 (11 months at US$3,000) | US$18,800 |
| The bills | −US$14,900 | −US$13,800 (US$10,500 and a US$3,300 manager) | US$0 |
| Left over | −US$14,900 | +US$19,200 | +US$18,800 |
"It does keep its value," Connie said. "I am not saying it doesn't."
"It keeps it," Fred said. "While we are in it, it also gives us a place to sleep. When we are gone, it hands over nothing, unless we rent it or sell it."
They agreed on that. The house had been a good place to keep what they earned over forty years of work. Paying for an apartment abroad each month needed something that paid out on a schedule. The house did that only if someone lived in it as a tenant, or if it was sold.
You could…
- Write down what your house sent you last year, what it cost, and what a home like it would rent for.
- Decide how much of your wealth you want held in things that store value, and how much in things that pay out.
- Ask about three ways to turn a house into monthly money: selling, renting, or a mix.
Does your house feel more like savings or like a paycheck? Tell us which it feels like, below. A reader asking Connie's question for the first time could find your answer useful.
Figures are estimates for planning, based on public data, before income tax, with prices held flat. When a tenant lives in the house, the tenant pays utilities and routine upkeep. The US$10,500 owner cost in the second table is an assumption.
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