Your House Is Not An Asset? HUH? 🤪

[jeffg]

I believe it comes from the Robert Kiyosaki book (Rich Dad, Poor Dad). In that book his rich dad character defines an asset as any investment that is netting him positive cash flow. As most homeowners can attest, a house is a money sucker. In his mind, if it generates $$ obligations each month, it should not be looked at as an asset. They don't say you shouldn't buy a house, just don't view your primary residence as an asset.

It is not a strict accouting definition, and they state that. It's more a psychological frame of reference for investments. I happen to actually be rereading it now. There's some good stuff in there.

[sharmon]

Josh, I love your teaching and the examples you do for us. God bless you and please keep it going. I just tuned in to your video about your house as an asset or not. I first heard this from Robert Kyosacki. His point is that an asset is an investment which puts money in your pocket and a house you live in takes money from you. A house that you own as a rental he considers an asset. I think your points are well made. Personally, I think of my home as a quasi asset. I've seen home prices appreciate and depreciate. But to your point, you got to live somewhere!

[harrychu]

It is an encumbered asset with varying degrees of subordinate interests. Therefore you should add in all liabilities including property taxes and insurance fees and common charges if applicable. Transaction fees should also be factored in b/c you cannot avoid them if you want to pull that $20k out.

[sergiosantana]

Imputed income is more in the $12k range 30 years later once home has been paid rents appreciate in the 2 to 2.50 range .Inflation was not factored in the $6500 inputted income and even if your home is not paid for your payment states fixed while the rent continues to climb

[brucesmith]

Thanks Josh wonder which is better and listen to people discuss which is better and often finish thinking I didn't learn a thing. This was very clear and understandable.

[JimmyHuynhdesign]

I think a house is an asset if you plan to sell, down size, and keep the difference...or rent it out for a monthly income. If you just live in it till you die, then it turns out to be more of a life style inflammation thing. Most people never even see the value of their house because once they sell it, the money is dumped into another house. I try to keep my yearly rent lower than the cost it would take to just maintaining a house. My co-worker pays 12k a year in property tax every year and my yearly rent is just over 10, 500. My experience is primarily from CA house prices btw, its crazy high here. I think it would be a different story if houses were only 150, 000-300, 000...

[Condorsat]

Comes from Robert Kiyosaki of "Rich Dad Poor Dad" fame. Asset puts money in your pocket and Liability takes money out of your pocket .. we're talking day to day basis here.

[SantaBarbaraAlberto]

Great video! We watched "Meet Kevin" Solar Scam and agree, the video was great. He needs to do a follow up about guarantees.

Absolutely, a house is an asset as you showed. Loved the part about imputed income. This is how we view solar. Elimination of an expense in retirement. We multiple it by 25 years to estimate a value.

[kevinhuff]

Is a bond that is going to return an inflation adjusted negative return an Asset? When you add in all the taxes, interest payments, maintenance costs, and insurance do you actually come out ahead owning a home? That said you do need to live somewhere. I'd be happy in a van by the river but the family wouldn't.

[jerrydesu]

It comes from Robert Kiyosaki's book Rich Dad Poor Dad. Basically, an asset feeds you, a liability eats you. A home you have a mortgage on is an asset for the bank, not the person paying for it. If you rent it out and make positive cash flow, then it's an asset. The book considers something an asset if it keeps paying you whether you are working or not. It was written back in the day when everyone was buying things they didn't need and maxing out their credit cards, so that should give you a sense for where they were coming from. If the house is paid off, that's an entirely different thing and definitely better than either renting or having a mortgage unless you have a better place to put the money to earn income from.

[ronloftis]

My home is an asset that is fully paid for. At some point in the future I will downsize the home to unlock the cash that is frozen in an asset that is not fully working to it's fullest potential.

[rmpruitt]

That is a 25% increase in your first example, but your point is right on

[patreither]

When comparing the cost of owning vs renting you should include the opportunity cost of the $100, 000. The renter could invest the $100, 000 and make some return. If you don’t consider what the renter is doing with the $100, 000 then your not comparing apples to apples.

[TexasCountryLiving]

Real estate is an asset. Unless you live in it. Then it’s a liability. Huh?

[scottrichardson]

Equity looks good on paper but it ISN'T an asset until u sell and liquidate that asset.

[stuartclubb]

Kiyosaki is strict on his definition of an asset from wealth generation perspective in that if it doesn't bring in income, it's a liability because it costs you money (that you have to earn elsewhere) to maintain it and keep it. It's not a bad perspective as many people end up house poor as the property taxes and insurance still keep going up.

Imputed income is a great way of looking at it.

[sergiosantana]

If a home was not an asset then there would be no such thing as a reverse mortgage .Imputed income value just went up even more if you utilize a reverse mortgage .

[Zues]

Assets = Liabilities + Equity. The problem with homeownership, there is rarely positive cash flow. Yes, you're paying down your principal loan over time, which adds to equity, what most people fail to consider however are cash outflows every month to own and operated the home, to include the interest they're paying on the loan. As a homeowner for 20 years, I've concluded ownership costs sucks. Houses are money pits.

[chrisarnold]

"Imputed income"... A new concept to me that I will think about more clearly in the future.

[chrisp]

It comes from Robert Kiyosaki. Rich dad poor dad. He only considers assets as those that are income producing . Obviously it is an accounting asset, but in life the house is a liability because it just sucks money and doesn’t make you any money.