Your Greatest Asset

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Your greatest asset… is not your home?

I’ve heard it so much that I still almost believe it, even if it’s not true.

Your home is not your greatest asset.

(That is, if you actually live in it.)

This is another great lesson from the frame-breaking book “Rich Dad, Poor Dad”. I’ll (once again) say that I don’t buy everything that author Robert Kiyosaki is selling (namely the extremely high-leverage real estate flipping techniques), but there are some absolutely essential truths in this book.

One of these truths is simple, yet profound:

Assets make you money.

Liabilities cost you money.

That’s it. Everything in your life is either costing you money, or making you money. In that sense, your home is a textbook liability if you are living in it. It’s only an asset if you are renting it out.

The exception to this is earning equity.

Of course your property can increase in value, and in that sense become an asset.

But:

1) you must factor inflation into the equation

2) you can’t count on it

3) you still need a roof over your head

and 4) it’s been an epic 15 year run of booming real estate values with hardly any adjustment

(Bull Market Of A Lifetime, reporting for duty sir!)

I have friends who lost their hineys back in the oughts, hoping and dreaming that they were getting in on a massive real estate equity opportunity. Turned out to be the biggest bubble of our adult life (thanks a lot, interest-only loans).

The Rich Dad method is to build a portfolio of assets. This requires time, money, some sound judgement, and a wee bit of risk (which I like to rebrand as “a sense of adventure”).

Creative ways to convert your home into a solid asset:

• Rent Arbitrage: buy where rents and occupancy rates are high and rent the house, but actually live somewhere else where rents are lower (even if you’re renting and not buying there).

• Duplex It: if you can stomach the idea of sharing walls again, buy a duplex or triplex instead of a house, and be a live-in landlord.

• Granny Not-So-Flat: buy a place with a rentable apartment space in the yard or over the garage.

• Do Wheelies: if you have the space, you can add an RV or mobile home to rent out for a monthly rate (but expect to get less than you would for an apartment).

• Hit The Bricks: Wanderlust, much? Go mobile. Motel, hotel, Holiday Inn, whatever it takes. If you have a remote job or are independent, you can pick up and move to different places from time to time, while owning and renting out your sticks-and-bricks house.

Are you going to change your mindset from a liability-first consumerfest to a FIRE-ready asset builder?

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