Rich Dad's Robert Kiyosaki: Sacred Cow of Money (5) - Your House is An Asset

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Sacred Cow of Money 5

Your house is not an asset, it is actually your bank asset if you can read a financial statement.

A lot of people are in trouble now a day because they think that their home is an asset. They are saying that their home has appreciated value, this is capital gain vs. cash flow. However, a house is not an asset, because it take money out of your pocket. Some are saying to own a house, you get a deduction for the interest, but it is still money out of your pocket. The best you can get is 40 cents out of a dollar, but you are still out 60 cents.

Sometimes people who has pay off their mortgage, go and get mortgage for their property, so that they can get a deduction in taxes. However, if those money are not put to efficient use (such as buying asset), they will be liabilities to the borrower. Some people are over improving their houses, they put in $50,000 to increase the value by $20,000.

50% of the mortgage is greater than the value of the property and this is affecting the whole community. People aren't able to sell their house because the value is so much lower than the mortgage and they will make a lose if they sell it.

Robert is not saying, "Don't buy a house". He is just saying, "Don't be financial ignorant and call your house an asset, if it is taking money out of your pocket."

This is the best time to buy real estate, but you need to be financially educated in order to do so. The reason is because you can leverage on good debt (mortgage) to buy real estate. However in order to do that, you must have high financial intelligence.

Assets:
1. Business
2. Real estate (positive cash flow property)
3. Paper estate (stocks, shares, etc.)
4. Commodity (gold, silver, oil, precious metals, etc.)

Come join the cashflow game to learn how to effectively leverage on debt and invest in four kinds of asset classes:

http://www.singaporecashflowclub.com

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[leo14t]

Dear Robert,

Your book changed my life!!