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Thread: Why your house is not an asset, but a liability!

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    Why your house is not an asset, but a liability!

    Accountants erroneously tell us that our homes are assets. I want to be more specific: Owner-occupied houses are not assets, but liabilities. An asset is what puts money into your pocket. A liability is what takes money out of your pocket. Your house is a liability because, you pay tenement rates to the government. You pay for maintenance. It becomes an asset when you rent or lease it out. Here, it becomes an income-yielding venture!

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    Diamond Member adrianh's Avatar
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    LoL - Your view on economics....she's not beeeeg...

    Asset: An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
    “Why, sometimes I've believed as many as six impossible things before breakfast.”
    ― Lewis Carroll, Alice in Wonderland

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    Diamond Member Justloadit's Avatar
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    Another point, You are not paying rent for being in the property that you own.
    If you did not own the property you would be paying a landlord rent to use the property, so effectively you are saving on rent.
    The fact you have a bond to pay, is another issue, and is an investment to own the property, so this can not be a liability.

    I hear many people who say they lost money on the home, because for lack of maintenance the property lost value and when they sold it, it was for less than what they paid or for the same they paid for it.
    In one way, inflation does play a part in this, as over time your cash does devalue, but if an asset is maintained, it will retain its value, although it may seem that you are getting more money for it. Effectively inflation has skewed the numbers. Over a 25 year period in RSA, the money has devalued tremendously, although it seems that we are getting more Rands, but this is incorrect. R1000 in 1994 has a buying value in 2019 of approximately R4,100.00. See this website, inflation tool to do some interesting calculations .
    Don't forget that you lived in the asset with out paying rent, this is a major saving. When paying a bond over 20 Years, the amount paid is always the same, however inflation will make it easier to pay every year.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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