Do u guys still believe that a house is a liability as explained by mr.kiyosaki?
By girishmallya
@girishmallya (6)
India
5 responses
@dudumodu (48)
• Israel
11 Jan 08
This is simply the direct answer to the question.
However, let me clarify further that Kiyosaki did not say categorically that a house IS a liability. What he did say is that a house CAN be a liability.The key to understanding what he means is in understanding the difference between a liability and an asset : an asset puts more money into your pocket than it takes out while a liability does the reverse.
Whether a house will fall into the one or the other category therefore depends on how it fits into the said income-expense relation pattern.
The first point at which this is determined however is right at the design stage.This is why Kiyosaki said that a rich man is likely to think of building an apartment than a mansion.Where is the difference; simply, an apartment uses the same space to satisfy the housing needs of more people than does a mansion.
Consequently, the expences on that house becomes shared by more people.
If this design stage decision is missed, it is only with luck that you may have a house that somehow can be between i.e it can either be a liability or an asset, this being possible where the design allows you to conveniently sublet a portion when necessary.
It should also be noted that Kiyosaki did not say that mansioins should not be built;the whole point of financial independence is for you to live a fullsome life.What Kiyosaki did say was that, an owner occupier mansion is a luxury and should be built only after the owner has built enough assets to enable him fully cover the related expences both for now and the future.Building these assets may or may not involve the building of houses, but whether from a previous house or from other assets like shares, companies etc an owner occupier mansion should come into our lives only after we have built a big-enough,ongoing income stream to fully cover the anticipated expences like tenement, property tax etc.
Clearly, this is one of those points which I hinted in another posting that I am afraid people may miss
Dudumodu
@creationsbyrobin (3071)
• United States
15 Jan 08
It is a liability. You make no money from it and the more you owe, the more of a liability it is. It isn't a bad liability, like credit card debt. But it is a liability.
Do you earn money from your house? Does it cost you money every month, like a morgage payment? That is considered a liability. It's true that at some point, it becomes less of a liability, like when you pay that mortgage off.
But upkeep, repairs , etc will always keep it a liability (unless you own a 2-family house and have the mortgage paid off and the rent is profit)
If you think about it, everyone has this liability and it's funny when your banker or financial advisor try to tell you it's an asset. For your banker, it is. For you it isn't.
@DuoMaxwell (953)
• United States
15 Jan 08
Now why should anyone call a house an asset? It's almost like a financial edition of The Matrix; those who call their house an asset when it's really a liability is taking the Blue Pill. Like Robert Kiyosaki's dad (Poor Dad), they believe whatever they want to believe, and to them, ignorance is bliss. They're just deluding themselves into thinking that their house puts money in their pocket, when in reality it TAKES money from their pocket.
On the other hand, Mike's dad (Rich Dad) decided to take the Red Pill. He's learning how deep the rabbit hole goes, or in this case, how deep his financial literacy goes, and teaching Rob the same thing just like Morpheus is teaching Neo how to fight. I've seen the movie, and I'm starting to see many parallels in real life, especially in finances like this.
I mean, if you pay lots of money on your house, especially on a mortgage (and I have no idea what a mortgage is), then it's a LIABILITY.
@reipowerhouse (428)
• United States
24 Mar 07
Take this from a person who has actually lost their house to foreclosure before..... Your primary house is nothing more than a liability. I lost my house becauase I lost my income and since I didn't have enough income coming in I lost my house where as if it was an actual asset then I would have never lost it.
In your tax returns (if you make decent money) it's a great thing to own your own home however if you make so-so money or if you don't mind paying uncle sam then I would suggest buying an investment that pays you before buying a house.... I would suggest everyone to be on my current path which is buy enough income producing properties in order to pay my house payment for me without my income from working.
@krowbar (79)
• Philippines
12 Nov 07
It all depends on how you utilize the house. If a liability is something that takes away money, my body is a liability hehehe! I have to eat everyday! But, I also use my body to gain money (physical work) so it's ok :) Now, about your house, if it takes owning a house for you to be able to perform your work well (think comfort, safety, etc), it's all good. Anything more than that, it's a liability.
To add to that, your house does appreciate (and sometimes depreciates, but that's another story), so it also gains you money. This is much better than buying an empty lot and hope it appreciates (buy,hold,pray) because you are actually using the lot. Plus, you also do have cashflow from the best tenant in the world - YOU! (c'mon, think about the rent you pay from your landlord, you are renting a house from the best landlord in the world - YOU!)
So it all depends on how you categorize/view your house and what you do with your house (use of space, efficiency) to be able to determine if it is an asset or a liability
