[wully00]

Pulled this off the wealth topic... that one was getting kind of heated. Can anyone justify why you would not consider your house an asset with any better reason than "it doesn't make you cash"? My retirement accounts don't give me monthly cash payments, but I still consider them to be assets :-)

[freedom.project]

I personally look at it from he Rich Dad view.

Your house is worth so much money but...it still has expense such as utilities, maintenance, repairs, taxes, etc

But you retirement account is something you put money into and cost you little to nothing to have.

Any questions?

[wully00]

I read Rich dad, it was one of the big things I disagreed about. Utilities you will probably still pay if you have an apartment, along with a few others. The last few years being the exception, usually houses would appreciate much most in a year than you would spend to maintain them.

I wish retirement accounts were free... they still manage to charge you for things here and there.

[sarathy]

I think on the same lines as you but with this logic. If you sell your house for cash... where would you possibly live?!

[wully00]

Even if you own a property and rent it out, you still incur all the same costs of owning the property and then you have to pay rent for somewhere to live.

But thats a different arguement, I read three of the the RD books and I still never understood what he was talking about. Anyone understand this?

[Val3360]

Buying a house is usually an asset, but say you buy a house in an area that is booming for $800,000.00. Before you know it, the market's bubble has burst and houses are sitting unsold for years at a time... The economy in that area becomes depressed and the value of your home dramatically declines and is now worth only $500k, and you are still left owing $700+

Big "what if", I know, but it is an example of ahome being a liability vs an asset

[Young Spark]

Are we speaking from the perspective that the home is being rented out or owner financed? If so, then I believe it to NOT be an asset if you are renting it out. Since you are basically "renting" the home out, even though your generating monthly income, its still YOUR property and has responsibilities such as paying for property maintenance, property taxes, etc. These are liabilities (which is the opposite of an asset.) When you have something that requires you to pay out money from your pockets or using the income it is generating for you, I typically conform it to be a liability, not an asset.

Now if your owner-financing the home, then I would consider it to be a asset. Its collecting passive income for you (your collecting the payments for the sale of the home... the home was sold to the new buyers meaning the property taxes and everything is the new homeowners responsbility.)

Now if you have a mortgage on a home, its a LIABILITY as well. After all, 2 things, 1... the mortgage company owns the home, not you... so its their asset and your liability until you pay it off. Secondly, you have to pay property taxes on it and maintenance fees and everything else. Anything taking money out of your pocket = liability.

That's why I don't believe a home to be an asset unless your either owner financing it or own it free and clear of no mortgages, liens, etc.

[wully00]

I just don't see how this is possible, for example:

I buy a house for $100k. I have a $80k mortgage with a $20k down payment. While the liability is the mortgage, the house is the asset, so when they net out the whole property would show up on your balance sheet as a $20k asset.

Is this correct?

[Val3360]

I believe that if you are using the property as an INVESTMENT (ie, rental) than you are investing in the wrong thing. A wise investor would be buying the property for the equity and not the monthly income it bring in.

[wully00]

I agree rentals not the best source of income, but buying property is an investment no matter what you do with it. It should always be an asset... that is what I understand. It doesn't matter if you let it sit, rent it out, or live there theoretically.

[crackah]

Its an asset because it gives future economic benefit, and its the result of a past transaction, and because its controlled by you!

[wully00]

Thank you! So at least some of us are on the same page...