Comments on: Real estate: Asset or liability?

By: Cash Guy

Cash Guy — Thu, 08 Oct 2009 00:22:40 +0000

Here’s a better way to think of the Asset VS Liability of Home Ownership.

If I had $250,000 in CASH I would NOT buy a house.

Instead I would simply put a security deposit down and pay rent to live in a luxury high rise building on the water with FULL maintenance and No Property Tax or other liability associated with owning a property.

This would leave a tremendous amount of CASH for me to play with in other FAR MORE LUCRATIVE investment ideas than owning a house.

Even if I simply put say $200k of the money into a 5% money market fund I would earn a good amount of money on my money each year.

NOW lets assume I do what 98% of Americans would do, they would either put a down payment on a house and pay interest on the mortgage, taxes, insurance, upkeep, full maintenance bills, etc. etc. etc.

OR they would put the whole $250k to purchase a house with CASH and own it but the problem is all your $$$ are tied up in the house so now you own a house but your still going to have to pay Taxes, Insurance, Maintenance, etc. etc. and now your broke because all your $$$ are tied up in the house…

It’s far better to RENT and have money to play with and invest than to OWN a house and be BROKE.

By: Russ

Russ — Sun, 16 Aug 2009 14:21:48 +0000

It’s really simple, you choose to either make a profit, or generate an income. A house can generate profit or income, depending on if you live in it or rent it out. It also depends on how you maintain and/or improve it and how fast you do all this. Whether you qualify it as being an asset or liability makes no difference, as long as it’s eventually going to put money in your pocket…or take money out, the balance sheet, cash flow, all depends on your current financial ability to pay whatever mortgage and fixed costs (electric, phone, maintenance, etc.) are involved. Every rich person did not start out that way in life, except people who inherit (ie. Mike, Rich Dad’s son), hence not everyone has to work for their money, but only 8% of world population are millionaires…lol Good luck…or should I say, learn and work at it, ’cause nothing comes easy unless you’re selling your looks It’s all about how you work and how you manage finances.
Russ

By: repossessiongirl

repossessiongirl — Wed, 18 Mar 2009 22:56:24 +0000

Hey there – I personally own and managed over 50 rental properties. I take care of them , and my tenants. I owe the mortgage companies BIG TIME!!!! I do make a monthly profit of between £3000 – £5000. In ten years time, I will sell half of them to pay off the other half, and I will be in a situation of complete ownership. I know my assets.

By: Carlton

Carlton — Sun, 22 Feb 2009 14:24:45 +0000

I think it is a point of perspective on how we spend our money and what we want to spend it on. If it’s important to live in a house and enjoy all the tangible and intangible things that a home typically provides then it is an asset to our way of life. If my priority it to travel and see the world then a house with all its monetary upkeep; mortgage, bills, repair, taxes etc. would become a liability to my desire to only want to travel and not be anchored to a fixed point on this globe.On the other hand even an eagle has to stop, build a nest and …on the other hand some indians were cliff dwellers others lived in a tent. It’s about what makes us happy. What makes RK happy? What does he own that does not create a cash flow? Car, Boat, Clothes, I’m sure we all do things that the next person would not spend their money on. It’s not all about accumulating wealth. I read some place about a person’s wealth, it went something like this…” add up everything that money can’t buy and death can’t take away and that is a person’s true wealth” maybe some of you have heard it said other ways.

By: Andy @ Retire at 40

Andy @ Retire at 40 — Sun, 22 Feb 2009 09:11:37 +0000

I guess I look at these things through the long term. Yes, I have to service the debt on my house and I have to fix things up, paint things and keep things nice so it is costing me money to have it.

Hopefully though, in the long term it will end up being sold for more than the price I paid for it and more than all the other money I have put into it in the meantime.

Therefore for me, it’s an asset that is owned but might end up being an asset which also puts money into my pocket. It’s all about time.

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Sat, 21 Feb 2009 06:30:02 +0000

Kiyosaki is like Suze Orman. He is an expert in selling books and seminars and not much else. We are his “assets” because we keep buying them.

By: James

James — Sat, 21 Feb 2009 01:42:11 +0000

A great analysis. Ultimately thought, I think we need to take a broader view of homeownership.

1) Kiyosaki is correct in that it creates an obligation to pay, but for most people the choice is mortgage payments or renting, so either way you’d have to pay. In this case, its not clear that the assertion that “your home is a liability” is useful.

2) Homeownership is positively correlated with networth. So, Kiyosaki will have to explain why it is that home ownership INCREASES your wealth. If it were a liability, wouldn’t its effects be to DECREASE your wealth?

Ultimately, we may be better off if we real Kiyosaki not for technical or instrumental advice, but rather for inspiration.

By: Scott @ The Passive Dad

Scott @ The Passive Dad — Fri, 20 Feb 2009 00:55:27 +0000

I feel like a groundskeeper working for a home that keeps losing value. I’m starting to think it’s time to look at an investment property to create some positive cash flow that can offset our sinking home asset.

By: commercial real estate

commercial real estate — Thu, 19 Feb 2009 12:20:49 +0000

Funny timing. I just read that chapter of Rich Dad Poor Dad again yesteday.

By: Steve

Steve — Wed, 18 Feb 2009 21:07:20 +0000

If we all made decisions based on their effects on cash flow, we would all be leasing cars. I totally believe in renting in today’s market, but I still disagree with RK and his redefinition of asset.