Robert Kiyosaki: Don’t Count On Your Home as a Ticket to a Secure Retirement
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Martin Dasko
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Ashleigh Ray
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While many financial experts will tout the benefits of investing in real estate, there’s one who isn’t on board. Robert Kiyosaki made headlines when he stated that your primary residence is a liability. According to the controversial personal finance expert, a house is not an asset. Here’s a look at why your home isn’t a ticket to a secure retirement.
Why Your House Is Not an Asset
Why does Kiyosaki feel that your home isn’t an asset? According to him, a primary residence takes money away from you.
“Instead of putting money in your pocket, it takes money out of your pocket in the form of a mortgage, utility payments, taxes, maintenance and more,” said Kiyosaki on his Rich Dad blog. “That is the simple definition of a liability.”
When looking at technical definitions, an asset puts money in your pocket. Since your home is costing you money every single month, it’s a liability. As a homeowner, you have to spend money on expenses that you can’t avoid, like maintenance fees and property taxes. You also have to deal with any issues that pop up, from a leak on the roof to replacing your furnace. These expenses can easily creep up and eat into a significant portion of your monthly income.
If your home doesn’t have any cash flowing into it, then you have a liability in the form of your mortgage. As soon as you start to earn an income from your home, then you can consider it an asset, according to Kiyosaki. If your home is your ticket to retirement, you have to consider the expenses involved with owning your home that could cut into your income.
Is a Home Still a Good Investment?
When it comes to investing your money, there are different strategies, but your primary residence shouldn’t be treated as your ticket to a secure retirement. This is because you can’t control external market factors, such as future home prices.
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Kiyosaki believes that there are five primary asset classes:
- Business. As an entrepreneur, your business is considered an asset on your balance sheet.
- Paper. Kiyosaki says paper assets are investments like stocks, mutual funds and so on.
- Commodities. This refers to gold and resources like oil and gas.
- Cryptocurrency. This is digital currency that’s backed by a decentralized financial system on the blockchain. Examples include ethereum and bitcoin.
- Real estate. This asset class can generate revenue through investment properties or the capital gains earned through flipping a home. Investment real estate is about putting money into your bank account through rent payments. The goal is to earn enough in rent to cover the expenses, so this is an asset.
Can Your Home Be Your Ticket to a Secure Retirement?
Your home is the bank’s asset until you fully own it, since you have to pay interest every month on the amount that you borrowed. You can turn your home into an investment when you sell it, and the value greatly appreciates to offset all the costs involved.
Kiyosaki believes that relying on home appreciation could be a gamble, because a recession would wipe out all of the gains. When the book “Rich Dad Poor Dad” first came out in 1997, home prices were on the rise, so many experts were quick to consider homeownership a great investment. However, since then, we have experienced a few recessions that drastically changed home prices when they happened.
Investing in your home or real estate can be an excellent investment under the following conditions:
- You invest in real estate to rent out the property.
- You get into the short-term rental market.
- You have tenants living in your home paying you rent.
While waiting for your home to appreciate significantly before you sell it can be a tremendous investment, Kiyosaki feels you should consider your primary residence a liability until you earn income from it. This will make planning for retirement easier, since you have a clear understanding of your assets and liabilities.
The Bottom Line
While a primary residence can be the best long-term investment for many, you have to consider the expenses involved with homeownership. Kiyosaki summarized his thoughts best on his topic when he stated that your primary residence is your home, and it should be enjoyed for that purpose, instead of being treated as a retirement plan.
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