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Asset Vs. Liability

Updated: Jun 15, 2020

How you answer this question may determine your financial future.

Assest are items, property that actually puts money in your pocket.

Liabilities take money out of your pocket. Lately there has been a lot of discussion on whether the house you live in is an asset or liability. Thin about it for a minute. The 15 or 30 years you have been paying it off, was it an asset? Once it has been paid is it still an asset?

Sometimes when it comes to you home, you have to take a step back. If you have to pull money out of your account monthly or yearly, then the house is not an asset, its a liability. Even when the house has been paid off, you still must pay property taxes. If you dont they will foreclose on your home. In turn, that means as long as you owe taxes, and pay them out of your pocket, the house is NOT an asset, it's a liability.

Now, flip the coin over. You have paid the house off completely, you actually have the title/deed in your hands. You decide to relocate for retirement (hopefully early and not a late one) at which point you decide to keep the home, as a rental. You hire a realtor to rent the him out, you are charging $1,500.00 per month for rent. You pay the realtor their property management fee of $150.00 per month (10%), and the rest is yours. Yes, you have created another income stream. You are receiving $1,350.00 per month in income. Now, when you are asked if your house is an asset, the answer is 100% yes! It doesn't cost you a cent, and it puts money in your pocket, that's the true definition of an asset. As long as it put money in your pocket, if it's house, car, boat or a business it a asset!

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