Whether or not your house is an asset is a contentious topic.

In the school of Rich Dad Poor Dad, an asset is something that puts money into your pocket. Whereas a liability is something that takes money out of your pocket. A house generally takes money out of your pocket because of all of the expenses that come with home ownership.

Side note, if you haven’t read Rich Dad Poor Dad then what are you doing?! You can get it here.

Traditional thinking says the opposite, which is also what friends and family usually say, that your house is in fact an asset. 

I agree with Robert Kiyosaki on this, the author of Rich Dad Poor dad, that your house is not an asset. 

So, how can you turn it into an asset?

In this blog post I will explain why your house is not an asset, why that is necessarily not a bad thing, and also how you can turn your house into an asset.

Why Your House Is Not An Asset

As I mentioned in the opening paragraph, a liability is something that takes money out of our pockets.

Due to the variety of expenses that come with a house – the mortgage, bills, repairs, insurance, taxes, and so on – money is constantly flowing out of your pocket.

These expenses are a constant leak on our finances each month.

Not only this, but a mortgage is the single largest expense that the average person has. Imagine this expense was minimised, or even completely eliminated?

We’ll come onto how you can do that shortly using the rent a room relief scheme.

What Is Your House Then?

Of course though, it’s important to note, that a house for most people is more than just simply an asset or liability.

It’s a place where you live, have a roof over your head, feel safe, raise a family, and so on. Particularly with your own home, there is a huge emotional connection. If it’s a family home where you grew up, you don’t simply view it as a number on a spreadsheet or an asset or liability.

We all need somewhere to live, and generally speaking paying a mortgage is cheaper than paying rent.

Whether or not your house is an asset is a contentious topic.

In the school of Rich Dad Poor Dad, an asset is something that puts money into your pocket. Whereas a liability is something that takes money out of your pocket. A house generally takes money out of your pocket because of all of the expenses that come with home ownership.

Side note, if you haven’t read Rich Dad Poor Dad then what are you doing?! You can get it here.

Traditional thinking says the opposite, which is also what friends and family usually say, that your house is in fact an asset. 

I agree with Robert Kiyosaki on this, the author of Rich Dad Poor dad, that your house is not an asset. 

So, how can you turn it into an asset?

In this blog post I will explain why your house is not an asset, why that is necessarily not a bad thing, and also how you can turn your house into an asset.

Why Your House Is Not An Asset

As I mentioned in the opening paragraph, a liability is something that takes money out of our pockets.

Due to the variety of expenses that come with a house – the mortgage, bills, repairs, insurance, taxes, and so on – money is constantly flowing out of your pocket.

These expenses are a constant leak on our finances each month.

Not only this, but a mortgage is the single largest expense that the average person has. Imagine this expense was minimised, or even completely eliminated?

We’ll come onto how you can do that shortly using the rent a room relief scheme.

What Is Your House Then?

Of course though, it’s important to note, that a house for most people is more than just simply an asset or liability.

It’s a place where you live, have a roof over your head, feel safe, raise a family, and so on. Particularly with your own home, there is a huge emotional connection. If it’s a family home where you grew up, you don’t simply view it as a number on a spreadsheet or an asset or liability.

We all need somewhere to live, and generally speaking paying a mortgage is cheaper than paying rent.

rent a room relief
rent a room relief

Is Renting Good?

This is a slight tangent, but I am actually a fan of renting, especially if you’re younger (I am personally currently renting).

Renting is flexible, whereas getting locked into a 30 year mortgage is inflexible. Renting means you can move around more and have less attachment to one particular place.

Of course though, it all depends on your person situation,

Turn Your House into An Asset

I alluded to this earlier, but how can you then turn your house into an asset and reduce mortgage payments that you make?

You can rent out a room.

Taking this a step further, we are able to rent out a room in our main residence and make £7,500 per year completely tax free. This equates to a maximum of £625 a month. You can rent it out for more but you will then have to pay tax on the excess.

This is called the ‘rent a room relief scheme’. I have written an entire blog post on this before.

By renting out a room in your home, you are able to take a liability and then it into an asset – because now money is flowing into your pocket each month.

 

And that is how you can turn your house into an asset.

Is Renting Good?

This is a slight tangent, but I am actually a fan of renting, especially if you’re younger (I am personally currently renting).

Renting is flexible, whereas getting locked into a 30 year mortgage is inflexible. Renting means you can move around more and have less attachment to one particular place.

Of course though, it all depends on your person situation,

Turn Your House into An Asset

I alluded to this earlier, but how can you then turn your house into an asset and reduce mortgage payments that you make?

You can rent out a room.

Taking this a step further, we are able to rent out a room in our main residence and make £7,500 per year completely tax free. This equates to a maximum of £625 a month. You can rent it out for more but you will then have to pay tax on the excess.

This is called the ‘rent a room relief scheme’. I have written an entire blog post on this before.

By renting out a room in your home, you are able to take a liability and then it into an asset – because now money is flowing into your pocket each month.

 

And that is how you can turn your house into an asset.

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