Should Your Home Count Toward Your Real Estate Asset Allocation?
Should your home count toward your real estate asset allocation? Here’s why including it gives a more honest picture of your net worth and wealth.
INVESTINGPERSONAL FINANCE
Garrett Duyck
6/2/20269 min read
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There’s a debate in personal finance that never seems to die. You’ll find it in Reddit threads, financial planning forums, and probably in the comments of whatever article you read last week.
The question: should your primary residence count as part of your real estate asset allocation?
I've gone back and forth on this myself. For years, I excluded my home from my net worth calculations entirely. I'd track my investment accounts, my retirement funds, my digital assets, and then just... pretend the house didn't exist. It felt conservative. It felt smart. Turns out, it was neither.
If you're someone who tracks your finances closely, this question matters more than it seems. Your answer changes how you view your diversification, your risk exposure, and honestly, your entire financial progress. And if you're like most millennials who scraped together a down payment in the most brutal housing market in a generation, ignoring the biggest purchase of your life feels like a strange way to measure wealth.
Let me walk you through how I think about this now and why I changed my mind.
The Case People Make for Excluding Your Home
The most popular argument goes something like this: your home isn't an investment because it doesn't produce income. You live in it. It costs you money every month. Property taxes, insurance, maintenance, the occasional emergency repair that somehow always happens on a holiday weekend. By this logic, your home is a liability, not an asset.
Robert Kiyosaki popularized this idea in Rich Dad Poor Dad, and it stuck. An entire generation of finance enthusiasts internalized the belief that if something takes money out of your pocket each month, it's not an asset.
Here's the problem with that framing. It confuses cash flow with value.
Your home absolutely has value. Real, tangible, market-priced value. If you sold it tomorrow, you'd receive money. That's about as straightforward as the definition of an asset gets. The fact that it has a negative monthly carry cost while you live in it doesn't disqualify it from being an asset any more than an empty rental unit between tenants does.
Why I Started Including My Home
My home represents roughly 10% of my net worth. Not a dominant piece, but not insignificant either.
For a long time, I ran my numbers without it. My spreadsheets tracked brokerage accounts, retirement funds, digital assets, debt instruments, all seven classes of income-producing assets I write about on this site. The house was just... the place I slept. A line item on the expense side.
Then I sold my house. The proceeds moved directly into investment accounts. Something interesting happened: my tracked net worth jumped. Not because I'd actually gained wealth in that moment. I'd simply moved value from a column I was ignoring into columns I was watching.
That was the moment I recognized that excluding my home wasn't conservative; it was simply incorrect. I was viewing a distorted version of my financial progress. The wealth had always been present; I just chose not to acknowledge it.
Since then, I include the home. I use a conservative estimate of its current market value, subtract the mortgage balance, and count the equity toward my real estate allocation. My financial picture finally reflects reality instead of some arbitrary rule I inherited from a book.
The Real Difference Between Your Home and Other Real Estate
Let's be honest about what makes a primary residence different from a rental property or a REIT. It's not that complicated.
Rental properties and REITs produce income. They pay you monthly or quarterly. That income can cover their own costs, fund your life, or get reinvested. Your home does none of that while you're living in it.
Your home has carrying costs with no offsetting revenue. Mortgage payments, property taxes, insurance, HOA fees, maintenance. Every month, money flows out, and nothing flows back in.
That's the difference. And honestly? It's less significant than people make it out to be.
Here's why:
Your home can be converted to a rental. You could move out and start collecting rent on it tomorrow. The infrastructure is already there. The asset already exists. The only thing preventing it from producing income is your choice to live in it. That's a lifestyle decision, not a financial classification.
Think about it this way. If you own shares of a company that doesn't pay dividends, you still count those shares toward your net worth. A growth stock isn't excluded from your portfolio just because it doesn't generate income right now. Your home works the same way. It's an asset with potential, and its current use case doesn't change its fundamental nature.
Your Wealth Is Exposed to Real Estate Either Way
This is the part people overlook entirely.
Whether or not you include your home in your allocation spreadsheet, your wealth is exposed to the real estate market. If housing prices in your area crash by 30%, your financial reality changes. Period. Pretending otherwise because you put the house in a different mental category doesn't protect you from anything.
If real estate tanks and you've been telling yourself that your home "doesn't count," you're going to feel the impact regardless. Your ability to refinance changes. Your home equity line vanishes. Your flexibility to sell and relocate disappears. The market doesn't care about your spreadsheet categories.
On the flip side, if real estate appreciates significantly, excluding your home means you're understating your wealth and potentially making poor allocation decisions. You might over-invest in REITs or rental properties because you think your real estate exposure is lower than it actually is.
Including your home forces you to be honest. It makes you confront the reality that you already have a significant position in residential real estate, and that this should inform how you allocate elsewhere.
When Excluding Your Home Might Make Sense
I'm not going to pretend there's zero argument for the other side.
If your home represents 70 or 80% of your total net worth, and you're in the early stages of building wealth, including it can make your allocation look wildly skewed toward real estate. That skew might discourage you from investing in property-related assets that could actually serve you well.
For someone in that position, it might be useful to track two versions. One that includes the home and one that doesn't. The "excluding home" version helps you think about your investable assets and how they're distributed. The "including home" version gives you the honest picture of your total wealth exposure.
Both numbers are useful. Neither alone is complete.
In my case, because my home accounts for about 10% of my net worth and I hold a diverse range of assets across multiple classes, overexposure to real estate has never been an issue. I track the home alongside everything else, and the allocation stays healthy. But I got to that point over years of intentional diversification. Early on, the picture looked different.
The Net Worth Question Nobody Asks
Here's something worth sitting with. If you wouldn't exclude a rental property from your net worth, why would you exclude your home? Both are real estate. Both have market value. Both can appreciate or depreciate. Both carry costs.
The only meaningful difference is cash flow, and even that difference is temporary and reversible. You can rent your home out. You can sell it and deploy the capital elsewhere. The optionality exists. Pretending it doesn't is a choice to see less of your financial picture, not more.
Net worth is supposed to be a snapshot of everything you own minus everything you owe. When you start picking and choosing which assets "count," you're no longer calculating net worth. You're calculating something else. Something that might feel more conservative but is actually just less useful.
How to Include Your Home Responsibly
If you're going to include your home, do it honestly.
Use a conservative market estimate. Don't use the Zestimate blindly. Use a realistic number. What would your home actually sell for in a normal market, after closing costs and agent fees? That's your number.
Subtract all debt against it. Mortgage balance, HELOC draws, anything secured by the property. You're counting equity, not gross value.
Update it periodically, not obsessively. Once or twice a year is plenty. Real estate doesn't move like the stock market. Checking weekly is a waste of energy.
Watch your overall real estate allocation. If your home equity plus your REITs plus any rental properties push you past 40-50% in real estate, that's worth examining. Diversification across asset classes is how you build resilient wealth.
Remember, it's illiquid. You can't sell 5% of your house to rebalance your portfolio. Home equity is real wealth, but it's not flexible wealth. Factor that into your planning.
My Home is an Asset: Change My Mind
My position is straightforward: Your home is an asset. It should be included in your net worth calculation and considered as part of your real estate allocation.
Assets are things that have value. Your home has value. The fact that it costs you money each month doesn't change that. Plenty of assets have carrying costs. A rental property between tenants costs you money. An undeveloped piece of land costs you property taxes. A business in its first year might burn cash. None of those stop being assets because of negative short-term cash flow.
The Kiyosaki framing is catchy, but it leads people to a distorted view of their own financial position. I know because I lived with that distortion for years. When I finally dropped it, my understanding of my own wealth became clearer, and my allocation decisions improved.
Your home is probably the biggest single purchase you'll ever make. In a financial system that already advantages asset owners over everyone else, counting the assets you actually own isn't optimistic; it's just accurate.
What to Do Next
If you've been excluding your home from your net worth tracking, try running the numbers both ways this weekend. See how the picture changes. You might find, like I did, that you're further along than you thought.
And if you want to learn more about building wealth across multiple asset classes, not just real estate, I write about this stuff every week in my newsletter, Portfolios and Bedtime Stories. It's where I break down the strategies my family and I actually use. No pressure. Just an open invitation.
Your future self will thank you for getting an honest picture of where you stand today.
This article reflects personal experience and opinion. It is not financial advice. Consult a qualified financial professional for decisions specific to your situation.
Next Steps: Taking Action is the Real Cheat Code
Take into account the value of your home equity.
Compare your equity to your entire net worth.
If you don't own a home yet, read this.
Garrett Duyck is the founder of CheatCode Wealth and the writer behind the Portfolios & Bedtime Stories newsletter. He writes for employed people who want to build wealth without quitting their job, burning out, or missing out on life. Garrett is a former contributor to Seeking Alpha, where he built an audience of more than 4,000 readers, and he has published more than 140 articles about investing, passive income, and personal finance. He was among the top 20% of analysts according to TipRanks.
He has built a portfolio of income-producing assets that generates more than $50,000 per year in passive income, and he and his wife have paid off more than $180,000 in non-mortgage loans while raising four children. Garrett grew up in poverty, became a first-generation college graduate, and believes the best money strategies are the ones real families can actually stick with over time.
Educational Disclosure: CheatCode Wealth content is for educational and informational purposes only. It is based on personal experience, research, and firsthand investing practice. It is not personalized financial, legal, tax, or investment advice. Always perform your own due diligence and consult with a licensed professional before making significant financial decisions.
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