Your house is not an asset..

84 Replies

My girlfrIend and I currently rent a 1/1 apartment In San Diego, CA for $1475 ($735 ish each) and I am saving up for my first deal. Considering the high prices in San Diego, should I buy a rental property first and keep paying rent? Or should I buy a property that I can live in first and pay towards something that I’ll eventually own?

@Kristian A moreno , If you're just starting out, and you want the biggest bang for your [investment] buck... I suggest you house hack. You will get both of the same world. Look for duplexes, triplexes, or quad-plexes as your first investment, and later on as they are putting money into your pocket you can refinance that property into a full time rental. This will also be beneficial in many different aspects of real estate (i.e. managing rental properties). It's a win win for you, and give you time to save up extra money. Good luck and I hope this helps. 


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A personal home is a liability, cash is a asset. There is usually no less expensive housing than renting. Great if you are trying to save up cash or choose to live pay check to pay check. Most home owners between mortgage interest, taxes, repairs etc. etc. will likely put as much money into a personal home as it will ever be worth. That and the fact that their cash is sitting not earning it's keep it is easy to see why a personal home is a lifestyle decision not a investment. 

Even in the land of money CA, because you need to live somewhere, once you own a home the money/appreciation still unusually sits waiting for the home owner to die or move to a old folks home so the kids can get their hands on it. 

If I had my druthers the America dream of home ownership would have stay a dream.

Buying a home or any valued object that you will use for comfort could be viewed under the same light that @Thomas S. views it (e.g. vehicle, don't buy... use the bus). If you could move back into your parents house, this would save you even more money. Why not live off of other people (friends/family), why rent at all, and you could eliminate that expense factor all together? You could also find a cheaper place to rent and save (increase risk factor, but make more money). It all plays out to your goals and wants, and what is going to make you happy and feel safe.

Why not build up assets and have someone else pay for you to live in a home, a house of your own; or drive in a vehicle of your own? I personally like mine, and being able to do what I please with it. Shooter's choice...


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I'm always in favor of buying rentals over a primary house. I am on the side of the fence that doesn't think buying your own home is in any way an investment, except in very few cases depending on location and market timing. Here's details as to why-

With that said though, you aren't going to cash flow in San Diego on a rental property right now and prices are really high. Appreciation will inevitably still happen, but I'd be cautious about how much in comparison to how much you'd have to pay out every month to maintain the property. A lot of CA folks (myself included) invest out-of-state because of this.

The fact that you can't rent a house in SD to cover your cost, by default means it's cheaper to rent than to buy.

That said, yes, a house is an asset.  And sometimes the advantages to owning your home and the security that brings trumps pure financials on paper.     The money I spend on my home in SD (or would if I didn't pay it off) is higher than it would be to rent that same home. But guess what?  There is the intangible benefit of knowing that place is yours.  You can't get evicted.  You can invest in improvements to increase the value.  You have a huge inflation hedge.  You have tax benefits, etc.

IF you can get a SFH loan, buy a home. Period. End of story.,

And if you dont' believe me, go ask 10 investors who are where you want to be.  Ask if they rent or own. 

I believe the “your house is not an asset “ thing started with Robert Kiyosaki ( rich dad poor dad ) Some say a personal house isn’t an asset since It doesn’t generate income , but in the definition of asset there is nothing that says something has to generate monthly income to be an asset . How long do you plan to stay in San Diego ? What was rent for your unit 5 years ago , 10 years ago? Point is you could be paying a lot more in rent in the near future , I don’t see rents going down or stalling in SoCal . The house hacking thing of buying a 2-4 unit with an fha loan could be a good thing , if you can find a deal that makes sense .

I am of the opinion that your house is most definitely an asset. If you can access equity from your primary residence then you are able to leverage and purchase investment properties.

This is what I did. 

So I purchased my home for $185,000 16 years later sold it for $1.325M. During this period (16 years) I continually accessed equity and continued buying property and this is how I grew a nice size property portfolio.


@Marisa Rowe Quite a run up in price , what year did you buy and sell and what city was this in ?
@Kristian A moreno House hack! Wish my fiancé wasn’t forcing me to buy a SFH for us, preventing me from house hacking lol at least she’s letting me airbnb our guest room.

Its relative and depends on what is best for you. I'm a huge fan of being a renter while being a rental property owner:  it helps me maintain the perspective of a tenant (I stay plugged into tenant laws on an experiential level), it's cheaper (especially if you're in a higher end home), and you're off the hook for liabilities with the home. Its awesome!

But...renting can be a HUGE pain if you're moving all the time. My wife and I were reminded of this when we moved recently  (this is magnified exponentially with kids in the picture - "How did we accumulate so much stuff?"). The cost of moving is something that can be easily forgotten and when considered as part of the equation (since renting is touted as the cheaper option) it can really make buying a better option.

What's best for you and your future? Maybe a primary residence that you buy can be the basis of investment funds via a HELOC. Also, do you plan on being there for a long time? I would only buy if I lived somewhere for at least five years.

One another point: I'm also someone who lives in a very high cost area (Arlington VA, just outside DC). One of the several reasons I acquired a real estate sales license was so that I could be my own buyers agent and keep my commission in the transaction as equity (which for a normal house here can be around $15-20k from a ~3% commission). Maybe you could pick up a license in California if buying becomes an option?

In my opinion, renting is always the least ideal situation--there are no tax benefits and you are not building any equity. If you can't house hack, you could still buy a primary residence and rent out rooms (or the entire property) on weekends or at other set intervals via AirBnB. I do see both sides of the argument about a house being an asset vs a liability, but the fact is, owning will help you build equity which you can then leverage for future purchases.

I don't believe in your primary being a liability- if you know how to effectively leverage. If you house hack and force equity in your primary residence, you can leverage that equity and use it as cash, and it will be the most flexible and cheapest source of money you can get anywhere. 

@Marisa Rowe you are exactly right. We bought our first house for $300K. Fixed it up and brought the value up to $400K. We refinanced, pulled out the equity, and used that to buy our current house. Kept the first one as a rental. We could have never purchased this house ($570K) if we hadn’t done that. There is absolutely a benefit to buying a primary residence. In addition you have many more loan options and lower interest rates if it is your primary home. Duplex is a great idea too. If that fits your needs, go for it.
Originally posted by @Thomas S. :

A personal home is a liability, cash is a asset. There is usually no less expensive housing than renting. Great if you are trying to save up cash or choose to live pay check to pay check. Most home owners between mortgage interest, taxes, repairs etc. etc. will likely put as much money into a personal home as it will ever be worth. That and the fact that their cash is sitting not earning it's keep it is easy to see why a personal home is a lifestyle decision not a investment. 

Even in the land of money CA, because you need to live somewhere, once you own a home the money/appreciation still unusually sits waiting for the home owner to die or move to a old folks home so the kids can get their hands on it. 

If I had my druthers the America dream of home ownership would have stay a dream.

Thomas keep in mind in the US  the best tax treatment we have is the FREE or TAX free sale of a personal residence you lived in for 2 years.  many builders do this through the years.. this alleviates tenant  issues..  or the need to 1031  and I can tell you as someone who has done this many times over the last 40 years it simply gets no better than selling your personal home and putting a 500k check in the bank with no tax hit.. and in our case our all in house payment is almost half of rent.. and yes you do have to live somewhere.. 

but its nice way to build wealth with out the JOB of running tenants and the risk you take with folks..  Also the house hack I like simply on the west coast as you can get into a 1 to 4 units for little down at 97% financing which I know you like that max debt situation.. live there a year and move on.. you lose the 500k tax free.. but you now are buying rentals with next to nothing down and the best owner occ 30 year fixed interest rates. not a bad way to go.. 

Originally posted by @Joseph M. :
@Marisa Rowe

Quite a run up in price , what year did you buy and sell and what city was this in ?

 I believe her property is Australia ???   there have been huge gains in that country and no recession to speak of over the last 20 years.

at least in Eastern AU  western area around Perth things are not quite as rosy currently from folks I know in Perth.. 

@Kristian A moreno by definition a personal home would be an asset, but not an investment. You could transition it to an investment, by converting part or all of it to a rental.

@Account Closed the lessons that Kiyosaki taught in his book are meant to be parables. You are correct that by definition, anything that can be traded for cash is an asset. Your car is an asset. Your clothing is an asset. The point that Kiyosaki was trying to make is that any asset that costs you money is acting like a liability. His point being that you want to own assets that make you money, which is an investment. People like to argue that property values go up, but they neglect to include all the expenses of ownership. That includes repairs, improvements, taxes and even when you sell in 20 years, you have to adjust for inflation to understand what your true gain was. In some markets, it doesn't work out better on paper to buy.

I own my personal residence, but not because it is a good investment. It is emotional and all about control. Most investors do own their own home, but they don't view it as an investment either. The common person is taught to believe that their home is an investment and this is where the education system fails us. It is the mindset that the book Rich Dad Poor Dad aims to change.

My advice at a young age to Kristian would be to buy only if you are able to rent out part of the property. That could be renting rooms or buying a duplex and renting half out. Once you have cash producing investments, there is nothing wrong with buying a home for your family. Just understand you are doing it for emotional reasons.

@Kristian A moreno Why not buy an investment and live in it for a year? If you play it right you can still save up for a primary a year from now. If you house hack now, don't underestimate the fact that by having tenants pay most of your mortgage, you free up cash your can save for the next purchase. And you get you're feet wet with landlording (my lenders wants to see 2 years experience in landlording when approving investor loans).

before we start arguing, what's your definition of an asset?

Mine: A=E+L

I live in a low-cost area where you can realistically get a mortgage on a house for about half the cost of renting a similar house. It always makes sense to own here, and with some work and luck, you can find a duplex with one half occupied by a tenant and the other half occupied by your family that cash-flows positive. But there's more to it than the simple numbers of the western PA real estate market for me. I feel a profound psychological peace in owning my own home. I believe that effect is even more pronounced for me than for other people not involved in real estate.

I think this because I am pretty sure that at some point in any even minimally-successful real estate investor's life, or perhaps any investor who isn't losing her/or his shirt, the investor starts to understand that their life has become in many ways like Alice's after she stepped the looking glass. Everyday life occasionally takes on a certain surreality. What my wife and I do in addition to our W2 jobs (and I work my W2 job from home) is low-income DIY landlording, so I spend plenty of time going to my tenants' houses and fixing problems/working on improvements. A good deal of my time on the road is often spent in amazement at just how screwed up the world is.


I get to choose at which time I go, so I typically make sure that I avoid rush hour traffic or run opposite to it. I've talked about this on BP before. Whenever I travel against rush hour traffic, I can't help staring at the lines of bumper-to-bumper cars. Here are all these people, going to work or coming from their places of employment. W2 employment is their main, usually their only, source of income. My area is well-know for all kinds of snow and lousy road problems, so you don't see that many older vehicles on the road. So it's obvious that these people are all sitting in depreciating late-model cars that they're still paying off. Lots of them are SUVs, all-wheel drive vehicles to, again, deal with the winter weather and road conditions every year. Like most people who think a bit about money, I tend to calculate lots of things in my head. So as I move along against rush hour traffic, I'm calculating how much each car payment monthly makes the finance company backing it. running down mile after mile of bumper-to-bumper traffic. I'm also trying to calculate how much the gas companies that sold the people the gas in those cars are making off fuel burning off uselessly as the cars idle. And lastly, since W2 employees can't deduct any mileage expenses associated with going to or from their places of employment, I calculate how much the federal government is saving themselves in tax rebates by making what I consider the BS legal tax claim that no W2 employment transportation expenses going to and from work, none, zero, nada, may be deducted from one's income as one's personal expenses related to making a living.

Down against rush-hour traffic I go, mentally adding up the hundreds of thousands of bucks the gas company is making off the traffic, the millions the government is saving off it to add to their own budgets, the hundreds of millions the finance companies are raking in. Ka-ching, ka-ching, ka-ching.

Upon arriving at my destination I pull out the little logbook I keep in my car and note my mileage. As a small landlord, IRS rules allow me to deduct a significant amount annually in expenses from my reported household income related to keeping up and improving my rentals. My CPA assures me that this includes mileage to and from my home to my rentals to carry out repairs and improvements at, I believe, 53.5 cents a mile. 

All those other people going to work on the road? Nope. I spent no extra money in idled-off fuel in traffic, I lost very little of my free time waiting in traffic, I have no car payment because being a DIY landlord and driving an expensive vehicle around your area is up there on the list of the stupidest things you can do in the business.

I'm on the other side of the looking glass. I'm special. While we all enjoy the benefits of driving on the same public roads to get to where we're going, the wage earners are paying in blood, sweat, tears, and treasure for it while the government hands me money back for my own efforts.

This particular event happens almost every day, and no bones about it, it can certainly be destabilizing when you understand just how clearly the powers-that-be in our society think of those making money through investments as extra-special people, and those making money through selling their time for money as dogcrap under their shoes. It's easy to lose your bearings.


Having my own house helps with that. The door closes and shuts the everyday lunacy of the diseased world away. I don't have to deal with it. I know my landlord can't come to my door for some crazy reason and insist that he's about to evict me. I know that as long as I keep the financing and tax costs up that are associated with my home, no one's going to take it from me except under extraordinary political conditions. When I break something in my own house, I fix it, and I decide when and how to fix it and what costs are associated with that.

When I'm in a money squeeze, there have been many times when I just drop everything and go and do something on my to-do list around the house. Since I live in an ongoing live-in flip, there's always something to do. It helps me relax, and I also know that the fruits of this effort are never going to be taxed. All money in my pocket. This is just another benefit of home ownership for me.

I'm just a DIY landlord with a small portfolio under direct management. I try to keep things simple. Yes, I also live in a live-in flip. Yes, I'm also working on moving into a large duplex to try my hand at house-hacking. Yes, I'm working my travel hacks, my writing, and my review program participation, too. But that's all peanuts compared to what some of the people on this website are doing. So I am perfectly aware that the financial complexity in my life is just going to grow, grow, grow as time passes and things (hopefully) go well. More and more balls to keep in the air.


I guess what it adds up to is a conviction that making a buck in real estate isn't just about numbers. So far, I've found it's mostly about psychology, stability in a fundamentally destabilizing environment where the complex, age-old psychological concepts of home and hearth are constantly called into question by the nature of the business

I don't think it can seriously be argued that humans have not always felt affinity, a connection to the places we live. We felt it before we became human beings. It's hardwired into our brains.

The peace of home ownership helps me deal with the destabilizing, surreal influences in my world as a real estate investor greatly. I suspects it helps a lot of other people, too.

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@Joe Splitrock

I think a lot of it really depends on the situation  . I have seen many family , friends earn a lot of equity /money just buying a home in SoCal area and I’ve benefited as well from buying a home . It wasn’t a specific neighborhood someone had to buy in either , even the ghetto areas have gone up a ton too . 

Rents have also gone up significantly as well.

Since the poster is from SoCal Area , I was just thinking in terms of his location .

I’ve also had a relative own a home for many years in Western NY , and the home barely went up at all , maybe just beat inflation . 

That is a good point about people not taking inflation into account . People do seem to do it all the time . 

People definitely shouldn’t totally rely on their personal home as their entire investment .  But if one can get into a market that has historic high appreciation with a low down loan of 3.5% I think that could be a good opportunity to build wealth over time .

If it’s a house in an area where the repairs will cancel out any equity then it could still be good on an emotional level like you mentioned . 

@Kristian A moreno I Personal rent where I live and have About a million dollar rental portfolIo that has more cash flow than my personal rent. I plan to buy a personal house some day. I am a full time Investor and so I would be shooting myself In the foot to buy a personal house. Like some have already said buying is fine but its an emotional decision it’s not an investment. It can go up in value and if all you want is equity it’s not that bad particularly in San Diego. Also consider the market will most likely be dropping in the next 7ish year likely much sooner. Meaning you could lose all of the equity you gain.

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