Owning their own dream house is very special to most of the people.
Many are willing to spend all the savings and future income for the house of their dream. Normal middle class and poor people thinks the house for their own use is an asset.
I know that many people will get offended when I say that the house for our own use is not an asset.
Why your house is not an asset?.
Let us see what happens to a salaried person’s finances, after he buys or builds his own house.
He will use his all savings and take home loans for longer period ( normally for 20-30 years) for his house. For the next 30 years a major chunk of his salary will go out in the form of loan EMIs.
Money will also go out of his pocket to buy furniture and other furnishings
There will be yearly outgo in terms of Building/ property taxes , maintenance etc.
Monthly expenses will take money in terms of utility bills – electricity, telephone, water etc.
The bigger the house the bigger will be the regular expenses.
And we may not get a penny back to our pocket unless we decide to sell it with a profit. As the house prices are largely market dependent, the profit cannot be assured also
. As most of the people are emotionally attached to their home, making profits by selling the house is out of picture.
An asset is a resource which makes money for us.
But an liability is a thing which takes money from us.
So as an house takes money out of us regularly, in the forms of bank EMIs , taxes, maintenance, utility , furniture etc., a house is a liability and cannot be considered an asset.
And we know owning a home is very important for most of the people. So we tell you to have a house not thru home loans or savings but from the returns you have from your assets.
So from today, start acquiring good assets which will give handsome returns to fund you to make your dream home true.