Assets VS Liabilities
Robert Kiyosaki the author the one of the one of the New York Times Best Sellers which was entitled ‘Rich Dad, Poor Dad’ was often criticized for this belief that your house is a liability.
He stated – “your house is a liability because it doesn’t generate income for you.” Robert adds “All your house does is make you spend money, on repairs, your mortgage, taxes etc.”
We are not debating if owning a house is better than renting? No – but we bet you wouldn’t like Grant Cardone’s take on it. GC is another big real estate mogul who says that owning on a home is a trap.
GC says “Owning a home is a trap because it limits your mobility. In this day & age we need to be able to move in & out of different places to survive.” Grant further states that you should:
Rent where you live, own where you rent
In a nutshell you should rent your home where you live, and own rental properties where you can rent them out.
Assets produce Income
As hinted in our previous post ‘to define success‘ assets are by definition income producing properties. I agree with Robert Kiyosaki in that your house is a not an asset. Rather your house is a liability because it costs you money.
Early on we bought a condo, and lived there for 5 years. It was surprisingly expensive to own a condo. You had your $300 monthly condo association fee, and things often broke. The point of buying that condo was that we were paying a little more than if we were renting. If we were actually renting that square footage of space we’d be paying much more than owning it.
Later on we turned that condo into an asset which generated about $250 monthly income after management fees. We never wished to manage my own properties. That would defeat the point of owning.
Understanding Cash Flow is one of the biggest keys to success in this financial world.
Above is a copy of Eric’s cash flow analysis from when he was an employee for a small business.
4 months later we was able to start our own business that increased Eric’s Cash Flow by over $400. We was slowly becoming a successful business owners and generating income passively. It felt great to start creating a new life for ourselves.