Robert Kiyosaki says house, not let out on rent, is not an asset but a liability. This is because you don’t derive any income but need to incur expenses like taxes, insurance and maintenance. Naturally the question arises, “If self-occupied is not an asset, why should invest in house?”
You need to understand that you can’t apply the teachings of even great authors like Robert Kiyosaki blindly. If you take in the argument that a self-occupied house is not an asset, you will miss out on the following genuine advantages:
- Owning a house for many provides a tremendous sense of security. I know many family members shed tears of joy when they move into their own house. You can call it 'sentiments' or give any other name, but the fact remains that we are not emotionless creatures.
- I know many people, who bought their house on loan for which they had to pay a large amount as EMI (Equated Monthly Instalment), could find additional income or reduce their expenses to manage the EMI. Unless their mind was stretched, they would not have come with such alternatives. Interestingly within a few years, they could cope up with the EMI, thanks to the increase in their incomes. After the tenor of the loan, there was no longer any cash outflow towards EMI. Please contrast with the huge cash outflow of rent, had they not invested in the house.
- In majority of the cases, the value of their property has increased manifold. Now they can use the property value to leverage for their business also.
So, taking the concepts of any one blindly can lead to a lot of undesirable results. But one thing I tend to agree with great people like Robert Kiyosaki is that one should not go invest in a very big house for self occupation. The more I think about it, the more I feel Personal Finance will remain an art and can never become a science!
By reading this, don’t come to the conclusion that I don’t like Robert. In fact, I owe him a lot for my profound learning such as the new definition of 'asset' and 'liability', the concept of 'passive income' etc. The only point I am trying to convey is that not to take the teachings of anyone for granted and blindly implement. Seeking the advice of your mentor before implementing any new ideas or concepts will be in order.
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