Real Estate “Investing,” Is Your Home an Asset or Liability?

If your real estate purchase is costing you more money than it’s earning, it’s a liability. It’s taking money out of your pocket, and putting it in someone elses. From property taxes to maintenance, there’s hundreds of reasons your home might not be a good asset for you – and you may wish to consider renting.

One of the most common and easiest ways to consider your home an asset, is to check if it’s appreciating. Are the value of the homes around yours, or similar to yours increasing faster than you’re spending money to maintain proper ownership over your home? If not, you’re still losing money and better do something to convert it to an asset.

Rent out a suite, a basement suite, a room, whatever. This is a common strategy that is best applied to those with homes within walking distance of a good bus route, or in a town with a strong college/university, which people from all over flock to and are in need of renting space. If you’re investing in properties, making them rental properties is a good way to have them pay for themselves without you doing any work – past the time they pay for themselves, the majority of the rental income is profit: this is a good asset, especially if the home is still appreciating in value.

Don’t have the extra space to rent? Can you call your home part of your job? Whether you’re self employed or not, you need somewhere to live in order to work – if the home is costing you less than it would cost to reasonably rent in the area, it might be totally suitable for you to write off your home as part of your job – in which case it can be recorded in your assets column as part of your living expenses.

Offer a service at your home: be it a gallery of art work, a regular garage sale, etc., etc. If you’re doing this and flipping good coin, there’s a good chance your home will end up paying for itself in terms of being an area for you to provide this service. Again: a good asset, which will be mostly entirely profitable once your home is paid off.

Adam X. Knife is a real estate investor and webmaster. He runs a network of real estate sites dedicated to investment in Arizona, Nevada and Canadian properties.

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