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is your house an asset?

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  • is your house an asset?

    Is Your House an Asset? Let Robert Kiyosaki explain to you - YouTube

    many here might not like the views of kiyosaki but they are usually spot on. i have never been to a seminar but did read his book after i retired and was astonished to find that my own blueprint to retirement was the same as written by him, his philosophy is to use leveraged money to make money in cash flowing real estate..
    retired in 2009 at the age of 39 with less than 300K total net worth

  • #2
    Why I don't hold to his philosophy:

    According to his own video you posted, the only thing that matters is monthly cash flow (which I strongly disagree)

    So according to Kiyosaki, if you buy a house for $250,000 and rent it for $700 more than it costs each month, but the value of the housing market falls and your house is worth $220,000 2 years later, the house was an asset (by his only criteria of cash flow).

    But if the figures were switched, you bought it at $220,000, lived there and paid expenses on the house that save you $700/month in rent but generate no positive cash flow, selling the house 2 years later for $250,000, the house was a liability by his definition.

    In scenario one, you earned $16,800 of additional cash flow, but lost $13,200 overall. But hey at least Kiyosaki would call it an "asset."

    Scenario 2 shows that cash flow isn't the only thing that matters in becoming rich.


    My point is that his definition is not a useful distinction.

    Owning a home has the potential to earn income, or save expenses (if you don't own a home, you have to pay rent). And IMO, $1 of saved expenses is just as good as $1 earned income.

    Moral of the story: houses are assets. Mortgages are liabilities. See accounting 101 for details.
    Last edited by jpg7n16; 05-29-2012, 09:08 AM.

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    • #3
      How bizarre, and I'm surprised to see it coming from you 97guns. Cash flow isn't what determines if something is an asset or a liability. I imagine that you consider all of your gold and silver holdings to be an asset. How much cash flow does it generate for you? Zero. It is still an asset. It is a physical holding with monetary value.

      My house is an asset. My car is an asset. Artwork hanging on my walls is an asset. Jewelry is an asset. Cash under my mattress is an asset. None of those things generate cash flow.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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      • #4
        A house is an asset. Renting a house is like owning a dividend paying stock. A mortgage is a liability on the house.
        Brian

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        • #5
          This video makes me want to club a baby seal . Robert Kyosaki please go to a basic accounting class.

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          • #6
            Kiyosaki is a fraud. There have been a few folks that have dug into his background, and have exposed him as the charlatan he is. John T. Reed (no slouch himself when it comes to real estate investing) has some real dirt on the scumbag. I feel Kiyosaki and others like him ruin lives and should be called on the carpet for doing so. There never was a "Rich Man" or "Poor Man" if memory serves me from Reed's investigation into Kiyosaki. In addition, most of the bestselling status of the "Rich Man" series can be traced to Quixtar/Amway (or whatever they call themselves now).

            Is a house an asset? It's debatable. Ask the millions who lost their homes, conducted short sales, walked away, or are now underwater after putting thousands of dollars into improvements. Easy to pass judgements on those people, but I suspect that those passing judgement just won the real estate "timing lottery", instead of possessing some sort of investing genius. A "genius" that Kiyosaki himself claims to possess; when in fact what he actually possesses is a talent for marketing crap.

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            • #7
              Originally posted by Nightfly View Post
              Is a house an asset? It's debatable. Ask the millions who lost their homes, conducted short sales, walked away, or are now underwater after putting thousands of dollars into improvements.
              Whether or not your house held it's value, appreciated, or lost value doesn't change the fact that it is an asset. As I said above, an asset is a physical holding that has monetary value. That doesn't mean the value can't fluctuate up or down. It doesn't mean you are guaranteed to make a profit by owning it. Even if the value of your home plummeted after you bought it, it remains an asset.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


              • #8
                IMO, a house is a non-appreciating asset in most cases. Between paying interest, upkeep, taxes and insurance, you will likely only breakeven. It is still an asset, but not a good investment. But, we do not buy a house as an investment more than we do as a home.

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                • #9
                  houses are assets.

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                  • #10
                    Originally posted by disneysteve View Post
                    Whether or not your house held it's value, appreciated, or lost value doesn't change the fact that it is an asset. As I said above, an asset is a physical holding that has monetary value. That doesn't mean the value can't fluctuate up or down. It doesn't mean you are guaranteed to make a profit by owning it. Even if the value of your home plummeted after you bought it, it remains an asset.
                    If you want to quote dictionary definitions, not the point of this discussion, then yes: a house is an "asset". My point is: our society has gotten so screwed up with the home-ownership-at-all-costs mentality that it has become detrimental to many, many folks. "Asset" or not, owning a home isn't the end-all-be-all for many, nor should it be.

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                    • #11
                      Originally posted by Nightfly View Post
                      My point is: our society has gotten so screwed up with the home-ownership-at-all-costs mentality that it has become detrimental to many, many folks. "Asset" or not, owning a home isn't the end-all-be-all for many, nor should it be.
                      I agree with you 100%. I think the push for everyone to own a home is insane. Some people can't and shouldn't own a home. They don't need it and can't afford it. It has been the downfall of many families.

                      I was responding strictly to Kiyosaki's argument that if something doesn't create cash flow, it isn't an asset. That simply isn't true.
                      Steve

                      * Despite the high cost of living, it remains very popular.
                      * Why should I pay for my daughter's education when she already knows everything?
                      * There are no shortcuts to anywhere worth going.

                      Comment


                      • #12
                        Originally posted by disneysteve View Post
                        I agree with you 100%. I think the push for everyone to own a home is insane. Some people can't and shouldn't own a home. They don't need it and can't afford it. It has been the downfall of many families.

                        I was responding strictly to Kiyosaki's argument that if something doesn't create cash flow, it isn't an asset. That simply isn't true.
                        Agreed. I mean the thread is "is your house an asset?" not "is owning a home beneficial?" - so the definition is actually the discussion.

                        By Kiyosaki's explanation, your 401k would be a liability. It drains your cashflow each month. Cash comes out of your paycheck and goes into your account, which subsequently doesn't generate cashflow until you begin withdrawals in retirement. By his definition, that's a liability (net cashflow out each month).

                        Also, by his definition, Credit cards would be an asset. By using a credit card, you are able to hold onto more of your cash each month, thus increasing your cashflow. Does it matter that you are borrowing to generate that cashflow and aren't truly creating any real wealth? Not to Kiyosaki's definition.

                        His argument is just flat out wrong. Cashflow is not the most important thing in business, equity is. In personal finance that would be "net worth." if you increase your cashflow, but lose on your net worth, you are no richer for doing so.

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                        • #13
                          There's the technical description, and there's the "Josetann" definition.

                          I don't view our house as an asset, not in a financial sense. Now, it's an asset in the sense of "we have a paid-for house that we can live in at any time we need to, rent free, in an area with a low cost of living." But I don't look at it as "We have a house worth $X that we can sell at any time to fund Y." If we were to sell it, we'd need to already have another house bought.

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