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I just finished hearing the audiobook of Robert Kiyosaki’s Rich Dad Guide to Investing. I must say it is really really a very good audiobook and I’ve been learning a lot from it. A lot of thanks to Richard who is an avid reader of this blog who gave me the audiobook. In this article, I will write what I have learned about your house or your home as an asset or a liability.
Is you house an asset or liability? This is also the topic in one of the forums that I
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Comments
01.06.09
Read the comments on my blog as there are good comments relating to this post.
01.06.09
Tyrone,
There are some major flaws in this logic. By your logic no one would ever buy a house. How about when a mortgage payment is cheaper than paying rent? By your logic the house is a liability, but at least the house has resale value and you will end up getting some of your money back.
Plus, should never look at where you live as an asset or a liability, or even an investment for that matter. It's a necessity, you HAVE to pay money to live somewhere. Also, as a general rule of thumb if you are going to be living in a house in order for it to be financially smart you need to be staying there at least 7 years.
01.07.09
I look at a house as a libability from the aspect that I essentially am trapped in that house for a couple years with the market so down for sellers.
The hidden costs associated with house ownership make it a liability for me.
Tyrone/Daniel-While I tend to agree with Daniel's response, you have to take the concept for what it is and not draw clear-cut conclusions based on an abstract idea.
01.07.09
Chris,
Being trapped in a house sure beats the heck out of foreclosure and having no place to live, except your car.
01.28.09
Houses with mortgages are complete liabilities. This is what keeps the middle class stuck where it is. It takes 30 years to pay them off, and you could have used all that money in buying cheaper houses at foreclosures in full. By the time the house is paid off, a couple has to pay for kids' college tuition or retirement expenses. Just look at an amortization table. You spend more in bank interest and maintenance than rent. Any resale value is minimal compared to what that money could have earned in stocks. Rich people buy houses because they pay it all at once in full. They need some place to keep their money. Clark Howard and smart money experts keep talking about how you can save 30 cents on a razor if you buy the cheapest disposable kind, but they never mention that an average house payment of $1,600 a month breaks down to $53 a day or a $1,200 payment is $40 a day (not including taxes). Wow, that saved 30 cents on the razor or the dollar a day you saved in finding the cheapest phone service really did you a lot of good! Like being worried about the ant in the room without seeing the elephant.
05.29.09
You need to look at the opportunity costs involved.
If you don't buy a house, you have to rent. If your mortgage is lesser than your rent, then the house is an asset. If the rent is more, then take the Net Present Value (NPV) of difference after you payoff your house. That will tell you in how many years you'll break even and then after that your house is an asset
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