Why your house is not an asset and how to make it one

Many people purchase or build a house believing that it is one of the biggest investments they can make. However, this may not ring true to everyone. Rather than an asset, a house becomes a liability most of the times.

Here’s why your house is not an asset, according to Robert Kiyosaki, the author of the best-selling “Rich Dad, Poor Dad.”

It does not put money in your pocket

Investopedia defines an asset as “a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.” To make the definition simpler, an asset is “anything that puts money in your pocket,” per Kiyosaki’s definition.

If you buy a house and consider living in it until your retirement, you should know that it would take away money from your pocket. This is through mortgages, utilities, maintenance, taxes, insurance and so on. If you fail to pay your mortgages, the bank would take away your house. When you paid off your mortgages but failed to pay property taxes, the government can take it away. So technically, you do not own your house, as what Kiyosaki said in his blog.

How to make your home an asset

However, do not feel disheartened. To turn your house into an asset, you should be able to make money from it. There are several ways you can change it to a cash-flowing property.

1. Put the house on rent

If you own a big house and you have a spare room or basement, rent it out, Money Cactus suggested. Turn your house into a holiday apartment or lease a space in it for storage. These days, many people list their home through Airbnb. You will have money flowing in through the rental fees, which you can use to pay your mortgages.

2. Start a home-based business

You can turn a portion of your house into a home office, an art studio, a workshop or a business incubator. Amazon, Apple, Disney, and Google are just some of the popular businesses that started in the garage. With the advent of the internet, you can also use your home to begin an online business.

3. Sell it and downsize

A house’s value can appreciate over time, sometimes only at the rate of inflation, sometimes dramatically. To make money off it, sell your big house if its value has appreciated significantly and purchase a smaller one. It should be at a cheaper amount, so you can cash-out on equity.

4. Borrow on equity

Equity, also known as the second mortgage, is the difference between the market value of your house and how much mortgage you owe. You can use a home-equity loan to finance another income-generating property.

5. Grow your own food

If you have a huge backyard, you can turn it into a small produce farm. Grow vegetables and fruits for your family’s consumption and sell the excess to local vendors or your neighbors. This will enable you to have some cash coming in while saving on your grocery expenses.