Robert Kiyosaki, known for his incredibly successful Rich Dad Poor Dad empire, adamantly instructs investors that purchasing a property is not always an investment. He says that it’s only an investment if you carefully buy with the sole intent of using that property for positive cash flow. It’s a simple fact of life that anything which increases the amount in our bank accounts is an asset, but anything that eats away at the money in our account is a liability.
In reality, owning a property is actually a liability in almost every possible sense. Renter headaches, unforeseen fixes, daily upkeep. Homes are considered a liability even if you pay off your mortgage, as there will continually be a cost to constantly maintain the property. In terms of value, I’m sure you have no question about homes being worth something, however, what if it’s eating money out of your pockets every single month? Is the cost ensued actually worth it?
What to know about maintenance
There’s no way to get around the fact that if you live in the home you purchase— when something goes haywire and breaks— you will have to fix everything using your own hard-earned cash. Not only will there be a monetary cost for you, but also a time cost. Repairs take time! Time is money. You could spend hundreds of thousands of dollars and countless hours that you will never witness a return on investment since your home is not appreciating in value as quickly as it is crumbling to pieces.
What to know about digging roots
Such value in society is placed on freedom; the ability to travel, move, and escape a typical 9 to 5. Young millennials and Generation X tend to shy away from being anchored to one location by buying a home. The younger generation saw their Baby Boomer parents hit hard by the economic crash and do not want to go through that. This leads the majority of 30-somethings renting for life. Others feel tied down by owning a property. If the home shifts from asset to liability (and as Robert emphasizes, all homes become liabilities when you decide to live there yourself), not only will the property be a cash drain, it will also be an additional responsibility. You could say, “Oh— I can just sell the property when I wish to move,” but with the growing number of cases where your house won’t sell, there is a risk. You don’t want to get into a situation where you owe more on the property than it’s worth.
What to know about renovations
Flipping homes is uber-popular these days thanks to HGTV and other mainstream shows. People follow these upgrade-trends, spending $20k to revamp homes without even considering if they will ever see that money back. Making upgrades can be a good move, but only if you plan on selling the house immediately, and if you do not live there. Renovated spaces lose their glamour over time, and property taxes can rise. This means that all of your beautiful renovations could be for not.
It’s easy to notice that renting a property for another person to live in offers an entirely different scenario. When you turn your home into an ‘investment-only’ opportunity, you’ll receive an ongoing cash flow in return. The only considerations you will have to make are regarding the maintenance of the property, and for that, the simple fix is finding a property manage.
Why wouldn’t you want someone else to pay your mortgage? It can only benefit you. Take that rent money and in a couple of decades, you will see the amazing benefits!
