Is Your House really an Asset?

Today most of the people believe that their house is their biggest asset. In fact, many people say proudly that my house is my biggest asset.

And well, the governments, banks and finance gurus will also teach you that your house is your asset so buy a bigger house. They will give you the logical explanation that the price of real estate on which your house is built will go up and up in the future making you rich.

But well, the truth is that if you know that how to read the financial statements and understand the cashflow pattern of the financial statements than you will understand that your house is not your asset but the biggest liability.

This is because the Asset is something which generates positive cashflow means the passive income towards your financial statement while the liability is something which will make you expenses and takes money away from your financial statement.

Your House in which you live will make you lots of expenses every month and that’s why it is your liability and not the Asset. But well, the governments, banks and finance gurus will tell you that but the real estate of your house will appreciate in the future and make you Capital Gain income.

But well, just tell me that if you own a house worth Rs.1 Crore and in 5 years if it will become worth of Rs. 5 Crores than will you sell it? …Nope…Why?…Well, because you are now emotionally attached with your house.

But well, if your stocks portfolio worth of Rs.1 crore doubles in just 2 years than you will sell it right? Because you don’t have any emotional attachment towards your stocks right?

Just remember that the investment is something towards which you should not have any emotional attachments. If you become emotionally attached with your investments, than its no longer your investment.

Many people proudly argue that but I have taken a huge housing loan to save lots of tax. This is because the smart people do this. Well, Smart people don’t do this. Smart people know the power of the corporate structure to save lots of taxes.

Basically your house is the asset of your bank (If you have taken the Housing Loan) and the Government (Because you have to pay tax to the government every year) and not yours.

While the Rental property is your Asset because every month after deducting all the expenses, it puts money into your bank accounts.

Well, I am not against buying a big and expensive house. After all, rich buy luxurious homes. But the thing is that don’t call it Asset.

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