Is a Home an Asset, a Liability Or a True Investment Asset?

Do you really know what a true investment asset is? Is a home an asset? I certainly used to think my home was an asset. For a while there, my home was appreciating in value and my home equity was therefore increasing without cash coming out of my pocket. Also, my banker said it was an asset when he gave me my mortgage loan so what else could it be? A home also met the balance sheet definition taught to me in accounting classes in school.

My thought process changed completely after reading Robert Kiyosaki’s Rich Dad Poor Dad. He said my home was a liability, not an asset. I was unconvinced at first since this did not match the asset accounting definition I have studied in the past. Robert’s Rich Dad told him that in order for something to be an asset, it must produce income and positive cash flow. I do not rent my home to others so therefore; my home does not produce income. Since the only cash flow I have related to my home is the cash outflow of my mortgage payment, my property taxes, my homeowners insurance and my upkeep expenses, I can see that I have only cash outflows from my home. So according to Robert Kiyosaki’s definition; which is now my definition as well; my home is not an asset. It is really a liability because it creates many liabilities that cause cash outflows every month.

Again, a true investment asset produces income and generates positive cash flow. So my next step, and yours, should be to buy investment assets. I’ll also remember the correct assets and liabilities definition. My asset accounting definition has been changed forever because I have begun to educate myself, and I hope you’ll do the same.