Residential house - an Asset or Liability.

This is a very big question and you may get different answers from differnt individuals.

We feel that it can be asset or a liability depending on the situations and the thought process behind it.

It is a Liability :

IF you bought it for mental satisfaction of ownership and want to maintain through out your life.

A residential house is a liability because it asks you to spend money on it and do not yield any thing for you in return.

Expenses like property taxes , maintainance , renovations etc.

If it is taken on loan you have to pay an EMI aginst it, so you are not open for the opportunities available for growing your money.

If it is bought outright in cash , the same thing again, you had lost an opportunity of growing your money or wealth creation.

Because of EMI payments you may have to compromise on some things.

What ever the benifits on the rates are just notional.

It is an Asset :

IF you are going to consider it as an investment means you are planning to sell it of for your specific requirement.

It saves your rent to be paid for rented property.

It also helps you in saving the income tax to some extent ( U/S 80 C and 24 ).

Housing loan helps you to optimize the cashflows.

Your are creating an asset for you brick by brick by EMI.

The amount of EMI is to be considered as investment towards real estate asset class.

You can wait for right kind of opportunity to sell it.

You may recycle your gains from the sold property.

Do liability can become asset ?

Yes it is possible but don't let such condition happen in your life , your residential house which is a liability can be sold as a last source of funds required, this may be distress sell, planned sell is different.

in real estate market you should be always a buyer and not a seller to get a good price to your property.

What you should do :

At the time of buying a residential property you should have a clearcut understanding what you are going for : An Asset or a Liability.

Clear cut goal in your mind help in analysing the true nature of property.

About the author : Ashish Ramesh Bhave is a CERTIFIED FINANCIAL PLANNER, focused and specialized in financial planing for individuals and families.
Can be reached at arbfinancials@gmail.com or Cell : 08793107044