Definitely asset. I’ve gained about $100k market value on a 500k house over the past 3 years. That’s more than the past 3 years worth of mortgage payments 😄
Am I sure? Yes, very sure, unless you take the position that no one really owns property because the government takes it if we don't pay property taxes. Bought this small 120k apartment with savings and I plan to buy a second one soon!
Had this argument with my wife. I think from an accounting perspective it’s technically an asset but from the rich dad poor dad perspective its a liability. Rich people think in terms of cash flows. The rise in value of the house doesn’t put money in my pocket until I sell. Anything can happen until that point so until then the house you live in is taking money out of your pocket.
It's not the rise in value that makes it an asset; it's the face that it provides you with living space. That's money you don't have to spend on rent; money you can do what you want with.
Home is never an asset unless you rent it out. Or sell it for profit. If you live in it, it just eats money, so it's a liability. Even if it appreciated 100x on paper, it's still a liability unless you sell it. Because tomorrow all the gain might be gone for this or that reason.
Even if I don't have a mortgage, I pay taxes, repairs and stuff. Asset is what earns you money and liability is what eats it. Both rent and a house you live in are liabilities. If I buy a 5k beater and not a 100k Tesla, it doesn't make my beater an asset because I "saved" on Tesla.
If your beater car sits in the garage consuming space while you pay annual tax to own it, it's a liability. If it takes you to work every day and saves you money on train fare, it's an asset even if it has running costs.
Interesting - I think the definitions we have are different then.
My take is that homes are only securities that have unrealized gains or losses, just like stocks. So at that point, it’s a security.
However, when mortgages, HOA, property tax and general maintenance fees come into the picture, your balance sheet would indicate that a home is drawing money away from you, so net negative cash flow is making your home become a liability.
So maybe people have different opinions because people have different definitions.
Noo definitely wasn’t my question of how people use their homes haha.
But I think it’s clear now that people have different understandings of definitions and their personal financial statements; but I wanted to gauge it with a relative question
It's an asset as: 1. mortgage is usually cheaper than rent even with maintenance and it goes back to you (partially) once you sell the property. 2. prices always goes up on the long term, even if markets crash for a few years (i just made ~250k usd in 3 years). 3. When you buy a property, you "pin" your position in the market, so whether prices go up or down, you can still afford to buy a another equivalent property (in terms of location, size and quality) at the same price as your own. 4. If you die, your partner/kids/parents get a house for free (excluding taxes).
Disclaimer: there's always risks with any decision you make, you can buy a place that's rotten from the foundations and need to invest a lot to fix it. that's why you need to make sure you purchase a place that will not only be good for you to live in, but also easy for you to sell.
I'm just now noticing that the OP's bias was clear from the question; only one of the answers is grammatically correct. The wrong answer, as it turns out, so hopefully we can convince OP otherwise.
comments
Mortgage: liability
Just when you thought Blind isht couldn’t get any dumber.
This comment was deleted by original commenter.
My take is that homes are only securities that have unrealized gains or losses, just like stocks. So at that point, it’s a security.
However, when mortgages, HOA, property tax and general maintenance fees come into the picture, your balance sheet would indicate that a home is drawing money away from you, so net negative cash flow is making your home become a liability.
So maybe people have different opinions because people have different definitions.
But I think it’s clear now that people have different understandings of definitions and their personal financial statements; but I wanted to gauge it with a relative question
1. mortgage is usually cheaper than rent even with maintenance and it goes back to you (partially) once you sell the property.
2. prices always goes up on the long term, even if markets crash for a few years (i just made ~250k usd in 3 years).
3. When you buy a property, you "pin" your position in the market, so whether prices go up or down, you can still afford to buy a another equivalent property (in terms of location, size and quality) at the same price as your own.
4. If you die, your partner/kids/parents get a house for free (excluding taxes).
Disclaimer: there's always risks with any decision you make, you can buy a place that's rotten from the foundations and need to invest a lot to fix it. that's why you need to make sure you purchase a place that will not only be good for you to live in, but also easy for you to sell.