Liability or Asset: Is Owning the House You Live in a Wise Financial Decision?

Liability or Asset: Is Owning the House You Live in a Wise Financial Decision?

3 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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There is no doubt that Rich Dad Poor Dad author Robert Kiyosaki is likely one of the most well-known believers of the philosophy that purchasing a property isn’t actually an investment unless you very carefully buy one with the sole intention of purchasing a property that is worth the investment. This is simply because a property that you own is actually a liability in almost every possible sense.

The basic difference is that anything that increases the amount in our bank accounts is an asset, but anything that eats away at the money in our bank accounts is a liability. Our houses are considered a liability because even if we have paid off our loan, the cost to constantly maintain them will take money out of our pockets. So OK, yes, in terms of value, a house might be extremely valuable; however, when it is eating out of your pockets every single month, is it actually worth the cost?

multiunit-evaluation

Related: Should You Buy Your Own House or An Investment Property First?

The Harsh Truth Regarding Maintenance

The sad truth is that when you live in a home you buy, when something goes haywire and breaks, you will have to fix everything using your own hard-earned money and using your own precious time. Honestly, that is hundreds to thousands of dollars and hours (which you will never get back) that you will never be receiving in return since your home simply won’t be able to appreciate in value as quickly as it is falling into pieces.

The Harsh Truth Regarding Tying Yourself Down

In today’s society, there is a movement amongst the members of Generation X and young Millennials to avoid being anchored to a spot by buying a home. Just as Robert Kiyosaki often emphasizes, if you do not buy a home for the sole purpose of it being an investment and you decide to just live in it yourself, the house becomes a liability in every sense of the word.

After all, in addition to cash liability, it also becomes a liability due to the fact that if you purchase a home to live in yourself, you will not possess the luxury of being able to simply move around whenever you wish to. With the growing number of cases where your house won’t sell when you put it back out on the market — or even worse, when you end up owing more on your mortgage the worth of the property — this is definitely a messy situation you don’t want to sink into. 

tax-efficient-business

The Harsh Truth Regarding Renovation

Sure, flipping has become very popular, thanks to mainstream shows, and now multiple people have begun using it as a seemingly foolproof excuse to spend $20k revamping their property. This may be a good move, but only if you plan on selling the house ASAP. This is simply because if you keep living there, things such as the renovated spaces losing their glam and property taxes rising might just undo all the benefits of your expensive investments.

Related: Why the House You Live in is Probably a Liability, Not an Asset

So if you haven’t already noticed, if you choose to rent out a property for another person to live in, this gives almost an entirely different scenario. This is because when you turn your home into an investment only, you will have a rich source of ongoing cash flow depositing into your bank account, and the only thing you will have to ever worry about is maintaining the property (and that is something a property manager takes care of anyway). Having someone else pay your mortgage down is extremely beneficial to you.  

What are you waiting for? Take that rent money, and in a couple of decades, you will undoubtedly reap the amazing benefits. 

[Editor’s Note: We are republishing this article to help out those who have found our blog more recently.]

What do YOU think? Is it wise to buy a house for anything other than cash flow purposes?

Let me know with a comment!