Home is an asset, no a liability. Ok either or both of them. This is how most of us are confused when asked the question if home (house) is an asset or a liability. Let us analyze this from two perspectives namely:
1.) Investment perspective.
2.) Shelter perspective.
Note: I am not a professional but have experience in real estate investment.
Home: Investment perspective
According to Robert Y. Kiyosaki in Rich dad poor dad “asset is anything that put money into your pocket.” I will put it this way: an investment is a strategy that take something from you and replace it with something of higher value within a period of time. Hence if your home in any way generate some sort of income daily, weekly, monthly, yearly, etc it is an investment.
For instance, you bought land, build the house, live in part and rent part that generates steady income.
The income generated from the rent over time will pay off the cost of the house and can be reinvested back into the house or some other business. This is just one of the various ways your house can be an asset you.
Therefore, if your house generate steady income apart from the shelter is provides then it is an asset (investment). If you are using this perspective, your home is an asset.
Home: Shelter perspective
“Anything that take money from your pocket is a liability” – Robert Y. Kiyosaki, Rich dad poor dad. I usually say anything that take something and replace it with that of lower value is a liability. Hence if the cost of maintaining your home (house) affects the smooth running of other things without generating any form of income, it is a liability.
For instance, you bought a home (house), live in the house with just your family hence no income is generated from the house. You use money from your paid job to maintain the house, replacing expensive parts of the home becomes a boding. This I call pleasure at the expense of a good future.
Therefore, if your home takes valuable things and replaces it with less valuable ones or takes money from you without replacing it higher sum of money, then your house is a liability.
