A house is not an asset. Rather, it is a liability.

“A house is not an asset. Rather, it is a liability.”

So said Robert Kiyosaki. I read this in 2009 or so, as I was attempting to navigate the housing crisis. I had bought a home in Las Vegas, NV, 3 years earlier and was struggling with what to do with it.

Should I foreclose? Deed in lieu? Short sale? Hold it? Homes were selling at literal hundreds of thousands of dollars less than they had when we bought it and the math just didn’t hold. If I could rent it — a big if at the time — I would be looking at an $800 or so monthly loss. Something I could not afford. Too, I was looking at PCS orders mandating me to move in the next 12 months.

To the point, though, these words struck a chord with me that changed the way I looked at housing. Later, I would get a real estate license and share this philosophy with my clients (I still do).

I share this quote then tell them it’s both an asset and a liability, depending on perspective. I believe this perspective by Kiyosaki lends itself to thinking in terms of cash flow, which is a critical part (or should be) of the decision to buy or sale a home.

Does the home cash flow? If you have to move and cannot sell, can you rent it for more than you owe inclusive of maintenance and managment? If not, can you carry the monthly loss?

The counterpoint to Kiyosaki’s thought here should be pointed out: over a long enough horizon, housing has appreciated and the house you bought will likely eventually net you a positive return on the sale. The key point being a LONG ENOUGH HORIZON. Caps and bolded and this extra commentary for emphasis.

Many of my clients are military and will only be in a given area for two, three or four years. It is critical they think in terms both short and long. This sentiment by the Rich Dad, Poor Dad author helps, to my mind, inform this view.