The Difference between and Asset and a Liability
You may be surprised to hear that your home is not the investment you thought it was. When buying a home most people think that they are buying an investment. But what if I told you that this may not always be true. While the bank will view your home as an asset, you should not!
Let us look at why: Rule One. You must know the difference between an asset and a liability. Robert Kiyosaki author of “Rich Dad, Poor Dad” explains, “the primary cause of financial struggle is simply not knowing the difference between an asset and a liability.”
Ask yourself these simple questions:
1. Will this put money into my pocket? (Rents, laundry machines, signage, etc.)
2. Will this take money out of my pocket? (Need a new fence, repave the driveway, mortgage, condo fees… )
Here’s how we tell the difference between an asset and a liability: An asset is something that puts money in your pocket. A liability is something that takes money out of your pocket.
Conclusion: If you want to buy an asset, buy something that puts money into your pocket. Maybe your first home should be a duplex or triplex. Why? Because it generates revenue.
Comment by Dolly
yes, you are right but a duplex that got half burnt would need an urgent repair,or if it needs to be repainted, then i think it has turned to a liability or am i wrong?
Posted on September 4, 2009 at 6:45 am
Comment by Jennifer Walker
If the damage is just a matter of painting, no I should not think it is a liabilty now. However if it has more damage than that, you would want to take precautions to make it new again by a professional. When selling you’ll be legally binded to disclose the fact that you had a fire.
Posted on September 7, 2009 at 4:33 am
Comment by Park City Real Estate
Well, I am planning to buy a duplex. I really wanted to establish a home base business with my husband so we are really saving our money. What we’re after is the profit so having an investment is the first thing that we will do. Thanks for the conclusions! Much appreciated.
Posted on December 13, 2009 at 8:18 pm