Asset or Liability? Primary Residence

Is our home an asset or liability?

The answer depends on how we define “asset.” 😉

According to the Oxford English dictionary it’s a a useful or valuable thing or person. Investopedia defines asset as a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefits. 

According to these definitions a home is definitely an asset, 🙂 not a liability.

However I’ve also heard some people say that an asset has to generate an income or be cash flow positive. According to this rule a primary residence is not an asset. But personally I think an income generating asset is simply a type of asset but not all assets have to follow that rule. Kind of like how a blueberry is blue but not all berries have to be blue, lol.

For accounting and net worth calculation purposes it’s paramount to count a home as an asset. Otherwise we would run into problems like the following.

Year 1: We have is $100,000 in savings.
Net Worth: $100,000

Year 2: We buy a $400,000 house using $100,000 as our down payment.
Net Worth: -$300,000 because of the $300K mortgage.

Year 3: We sell the house for $400,000.
Net Worth: $100,000

As we can see, the net worth progression swings wildly from one year to the next. This creates a faulty balance sheet that doesn’t represent the reality of our financial situation. However if we include the value of our home as an asset then our net worth chart will become more realistic and less volatile.

Some people don’t consider their homes to be an asset because they say you can’t spend your kitchen. However to me that simply means a house isn’t a liquid asset. But it’s still a valuable property. There are ways to unlock that value such as getting a secured line of credit or reverse mortgage. We can also rent out a bedroom, a basement suite, or a garage to generate passive income. So in a way we can spend our home, just not in a traditional sense.


But one suggestion to keep track of our liquid assets is to create two separate net worth statements. One to determine our liquid net worth which only includes stocks and other liquid investments. The other to keep track of our overall net worth, including our home’s value. 🙂

In a financial context assets are regarded as having monetary value and real estate certainly fits this description.

Random Useless Fact:

In 1999 Google asked 16 students to test out their search engine. Upon reaching the site, they sat still for 45 seconds…just staring. Google finally asked what was wrong. All 16 responded the same: they were waiting for the rest of the page to load.

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10/04/2014 2:59 pm

We track both what we call our “investable assets” and our net worth separately, and the big difference between the two is the value of assets that are more like lifestyle items (house, car) than anything we feel like generates a return. They’ve both got their place in keeping track of one’s finances, I think!

10/04/2014 5:22 pm

Kim Kiyosaki had a sample spreadsheet before that I can not seem to find right now.. I do recall that the asset column was split in 2. Assets and Doodads. Assets as per banker was assets +doodads and assets as per Rich Dad was assets only. Liabilities was unaffected. So there was 2 net worth calculations which were per banker and per Rich Dad. In the doodad section was personal residence, cars etc. So therefore the Rich Dad calculation means your net worth is less than the banker’s version.

Robert Kiyosaki is not against owning a personal residence he just thinks people should not call it an asset. A doodad is basically a liability that people think is an asset. There is a video on youtube of him on Oprah in 2001.

10/04/2014 10:12 pm

That is so funny about Google and good info on net worth!

10/05/2014 6:21 am

An owned house saves a person on paying rent every month. The basement can even be rented out for some extra income. That sure seems like a revenue generating/cost saving asset to me.

Dividend Mantra
10/05/2014 7:53 pm


I think a personal residence is an asset, but I don’t think it’s an “investment”. If it is an investment, it’s one of the worst ones you can possibly make (take a look at the 100-yr chart on US real estate). Full of booms and busts for sure, but the long-term return is extremely poor.

I prefer to rent and use the savings to build my stock portfolio, which should provide MUCH better returns over the long haul. I’d rather buy stocks and rent a personal residence. 🙂

Best wishes!

10/06/2014 6:48 am

Its something we want, so I don’t class it as either. We will always have a house, which because it is paid for really is parked money for us. That said the liability side of it is that it costs money to maintain, but I would argue it would casot something no mater where we lived. So depending on who you are it could be classed as either, neither or both, it just depends how you track your stuff. As a few above note, we to track both investable assets and networth. NW is the sum of all things liquidated, which would include house, art, cars, crap in the garage… investable assets include only those things I use to generate investment income. many times non-liquid assets add to our quality of life, which is really more towards the BIG Picture of life. So regardless of whether people mock you for home ownership as being a waste of money, why not rent or vice versa, it comes down to personal choice, and who really cares what others think anyways… Live life your way! – Cheers.

Financial indepedence
10/06/2014 12:57 pm

Personally I would not home as asset. I do agree that there some irregularities while you are paying it off. However once bought it might give a false impression that you are wealthier than it actually is. You still meet a place to live. It’s called home.

10/08/2014 9:45 am

I think personal residence is an asset but not an investment. Unless you’re flipping your home every year, I wouldn’t consider it as liquid asset either.