When I hear new ideas regarding personal finance, I have a hard time getting them out of my head. So when I read Robert Kiyosaki’s theory about a home not being an asset, I had to carefully weigh both sides of the argument.
Argument # 1 Your House IS an Asset
I first turn to dictionary.com to get the conventional definition of an asset.
Assets-items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill,fixtures, machinery, or real estate (opposed to liabilities).
According to this definition a home would definitely qualify as an asset. A home could be converted into cash, although in today’s market the selling price of your home would likely be less than the purchase price. In the right market, over a given amount of time equity could be built and a home could be sold for a profit.
Argument # 2 Your House IS NOT an Asset
Robert Kiyosaki’s definition of an asset – something that puts money in your pocket. According to Kiyosaki, a liability is anything that takes money out of your pocket. Therefore your home is a liability, not an asset.
Money Flowing Out:
- Mortgage Payments
- Property Taxes
Money Flowing In:
- If you can sell for a profit.
The only way a home will put money in someones pocket is if there is a good real estate market and enough equity has been built. But even if the home can be sold that doesn’t mean that all of the interest, insurance payments, improvements, and taxes you have paid throughout the course of home ownership will be recouped.
I am in no way against home ownership. In fact sometimes owning a home can be less expensive than renting. But, I don’t think your home should be considered your biggest asset. Real estate can be a huge asset, just not the home that you live in. Unless you bought the home at a great price with intentions of selling for a profit.
What Do You Think? Do You Consider Your Home to be an Asset?