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?
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
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.
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.
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!