Re: Debate Topic: Is it better to own or rent your home? Asset or liability? - Posted by Ray (NJ)
Posted by Ray (NJ) on January 19, 2000 at 13:26:02:
In a nutshell, yes. Both.
In the traditional sense, it is an asset, in my opinion, because in general, it goes up in value. Additionally, since we all must have shelter, I’d rather pay a mortgage (or own it outright), than pay rent (all things being equal).
But, if I understand Robert Kiyosaki’s rich Dad (even Robert admits he still wrestles with the issue), he does not see it as an asset because it does not provide cash flow.
If you look solely at an Income and Expense Statement, a personal residence takes cash flow away from you (mortgage, taxes, insurance). It’s all cash flowing out, NO cash flowing in.
If you look solely at a Balance Sheet, it is an asset, because in theory, you pay FMV for a home, and it appreciates in value (again, in theory). Thus, it an asset.
If you take Robert Kiysaki’s whole package, the house, as an investment, is a liability, because even though it is an asset on the balance sheet, it takes AFTER tax money to pay for it, and provides NO cash flow in.
I think, if I understand his point and investing strategy, is to rent the home… from yourself. Have a corporation own the home, rent to you, offset the income/losses from other corporations you own, to keep your overall (personal) tax liability to a minimum.
His theory is, if you have a loan, make sure someone else pays for it. If you have other corporations providing income, THEY are paying the loan on your house, NOT you.
Now, if this makes ANY sense to you, please explain it to me! I’m just an average guy, average intelligence (I keep telling myself), no college, self taught. I am by far a legal or accounting expert. So, take that into consideration when you flame my post. ; )