Gurus like David Bach
Dana Dratch from Bankrate.com is approaching this subject in her article, Ballooning Equity Doesn’t Make You Rich. Dratch says the increase of net worth from an appreciating asset like a house only exists on paper. So a house is an asset, and is included on personal net worth statements, but not all dollars are created equal. It’s undeniable that $500,000 in the bank is better (or more useful) than $500,000 trapped in the value of a home. On a financial statement those figures are treated equally.
The article quotes a professor emeritus and author: The right mind-set is to look at your house not as an asset, but as a liability, until you’re finally going to sell it and drastically change your living style. Obvisouly a house, something you have, is an asset, but the argument is by treating it as a liability. This way as your house’s value increases over time, you’re not lured into changing your lifestyle.
Updated July 16, 2010 and originally published March 15, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 10 comments… read them below or add one }
I view the concept of getting rich from real estate via rental properties and passive income (asset), not from building equity via your primary residence (liability – if still paying mortgage).
If you actually read any of Kiyosaki’s stuff, you’ll see he does not state your residence is an asset. In fact, he makes it quite clear that your home is a liability. This is because it takes money out of your pocket (taxes, maintenance, etc.) instead of putting money into your pocket. Only income producing real estate such as a rental property is considered an asset by Kiyosaki.
I read your blog on a regular basis and it’s quite good. This is more of an FYI than anything else, but regarding the “gurus” out there, have you seen this site:
http://www.johntreed.com/Reedgururating.html
Many of the so called gurus are nothing more than shiesters who make money from books and not doing whatever it is they say will make you a gazillionaire.
Hopefully everyone is at least aware of both sides of the stories. The page above does go into factual detail and not just hearsay type comments (e.g. “This guy is a crook”). John T. Reed presents actual facts on each of the people in question and gives them his own “rating.” Read up and decide for yourself.
Thanks for the clarification, Shaun. I think the distinction between owning a home with or without a mortgage and owning a home that produces net income may be overlooked by the less astute. I’m not familiar enough with Kiyosaki’s writings but I do see how they are interpreted by individuals who follow him.
I’m a huge believer in owning real estate (your home) as well as rental properties-if that’s what you want. But…until that house is generating some cash flow it can sure give people a sense of false security.
I agree that your home should be considered a liability…as long as I am paying my mortgage every month, then it is a liability to my cash flow.
I side with Kiyosaki on this one. My home is a liability because it costs me money. A rental with a positive cash flow is an asset. I don’t even consider my equity in my net worth.
This line of thought (house being a liability) drives me absolutely batty every time I stumble across it. Your house is not a liability; your mortgage is a liability. An asset isn’t necessarily a money generating piece of property…
Hi, I have made the same article on my blog and this is one of my most commented article. You will be surprised by the various comments that my readers gave. Great thoughts there and they have proven somehow that not all Kiyosaki teachings are correct.
I remember reading “Rich dad , Poor Dad” a few years ago. The book leads you to believe that having liabilities are bad, you need to have assets. This of course is the end game/plan, you want to have assets (e.g., houses paid for in full, or houses generating equal or more income to cover expenses associated with owing it).
I have learnt that if starting small ( i.e, with little or no money) having a house as a liability is not that bad. If the liability (the house) eventually starts paying for itself through rental income.
So, don’t get upset your house is a liability if it incurs and expense to you. The end game is to have it become an assets, that is creating wealth for you.