Today's video is all about
whether your home is an asset
or a liability.
We are going to go over what
an asset is and what a
liability is.
And then we're going to talk
about the number one thing to
know when your home is
actually an asset or a
liability.
And then we are going to
figure out whether you should
or should not include your
home in your financial freedom
number.
And then we'll talk about how
to make your home an income
producing asset,
the costs of home ownership.
And then I am going to share
my thoughts on home ownership.
I am Tiffany Thomas with
wealthy tiffany.com
and I achieved financial
freedom and became a
millionaire.
If you're looking to do one or
both of those things,
make sure you hit that like
button and hit the subscribe
button.
And we are going to dive right
in.
All right,
what is an asset?
Let's define this so that we
can figure out if our home is
an asset or liability.
Essentially the dictionary
definition of an asset is a
useful or valuable thing,
a person or quality.
So in that regard,
yes,
your home would be an asset.
There's also another
definition,
which is something you own.
So that would be considered an
asset as well.
And then the last definition
is something that puts money
in your pocket and your home
may or may not fall under this
definition of assets.
Now let's talk about what a
liability is.
The dictionary definition of
liability is the state of
being responsible for
something,
especially by law.
So if you are buying a home
and then you take out a
mortgage,
you are responsible for paying
that mortgage.
Another definition is
something you owe.
So if you've not paid off your
home yet,
then your asset could be
considered a liability because
you would owe a certain amount
on your home.
So if you are paying that
mortgage,
then money would be going out
of your pocket.
The number one thing,
to determine when your home is
an asset or a liability is to
choose your definition of
asset,
because that's what's going to
help you determine whether or
not it is an asset,
because it does qualify for
some of the definitions of an
asset.
And it also depends on how you
are using your home,
which we are going to talk
about.
And when you are deciding
which definition you want to
use for an asset,
you can look at what you are
calculating.
For example,
if you are calculating your
net worth,
then I would include the value
of your home in your net
worth,
because it is something that
you purchased and you have
that value of your home.
And in talking about
determining your net worth,
if you're not sure how to do
that,
I do have a video for you
about that.
I'll leave a link above and
below.
And also I like to track my
net worth with a free app.
It is called personal capital.
You can hook all of your
financial accounts to personal
capital so that you can see
everything in one place.
If that's something you're
interested in,
I will leave my referral link
below in the description.
You can click on that to set
up a free account with
personal capital.
But if you are calculating
your financial freedom number,
for example,
the amount that you are
figuring out in order to
retire or become financially
free,
I would not include the value
of your home Because it is not
something that is producing
cashflow for you,
unless you're using it in a
certain way.
And the reason I would not
include the value of your home
when calculating your
financial freedom number is
because it's not producing
money for you,
unless you are house hacking
or doing a few different
things,
which we are going to talk
about in a moment.
But if you own the home
yourself and you are living in
it with your family or just by
yourself,
and it's not generating any
income for you,
then do not include it in your
financial freedom number.
A lot of people get confused
about this because they think,
oh,
well it is an asset.
It is a value.
But when you are calculating
your financial freedom number,
you want to look at the income
that is coming in.
So if your home is not
providing any income,
you can't include that when
you are calculating your
financial freedom number,
the amount that you need to
retire.
And if you have more questions
about calculating your
financial freedom number,
I do have a video for you.
I will leave a link above and
below.
You can check that one out
later on.
By simply owning a home and
not receiving any income from
that home that is not going to
help you retire because we are
looking for assets that are
giving you income so that you
can retire and live off of
that income.
For example,
if you have investments in the
stock market,
which you can cash out because
you aren't living in your
stock market investments,
you can cash those out and
live off of that money while
in retirement.
So let's talk about actually,
how to make your home an
income producing asset,
where you collect income by
owning your home.
One thing you can do is have
another person live in your
home.
That is what I do.
I have roommates and they pay
me rental income.
So I'm receiving income by
owning my home each month
because I'm renting out rooms
in my property.
Another way you could do this
is if you have a basement or
even just a mother-in-law
basement apartment,
you could rent that out to a
family or a couple and collect
income that way.
So it would be kind of more
separate than renting out
rooms that are right next to
your room.
Or you could even do a
short-term rental by using
Airbnb.
For example,
if you want to perhaps put a
room on Airbnb just for a
month to create a little bit
of extra cash flow,
you could do that.
Or if you are going out of
town for a long time,
taking a long vacation,
you could even rent out your
house for a month or two,
depending on how long you're
going to be gone.
Another option could be to
rent out empty space in your
house as storage.
So instead of someone renting
a storage unit,
they could rent out a room or
even part of your garage and
pay you to store their items.
Or if you have extra parking
in your driveway,
then you could rent out the
parking area to someone that
may have a boat or a trailer
that they don't use a lot,
but they don't have a place to
store it.
Or you could even rent out a
room for office space for
someone else.
Or if you have your own
business,
you could use a room for your
own office,
and it wouldn't really provide
income,
but it would give you a
reduction on taxes.
And also if you have a
beautiful large backyard,
you could rent out that space
for weddings or gatherings and
make some income that way.
So there's a number of
different ways that you could
make some income from your
home and make it an income
producing asset.
Next,
let's talk about some costs
that are associated with home
ownership,
because a lot of times people
just think it is so much
better to own a home,
but there are a lot of things
you need to pay for when you
do own a home.
For example,
there are maintenance costs.
You need to keep your air
conditioner up to date and
your furnace.
You have different appliances
like your fridge or washer and
dryer.
So you need to make sure that
those things are running
properly and do maintenance on
those.
And then even when those items
go out,
you'll need to replace those
items.
I had to replace an air
conditioner in one of my
properties recently,
and it was actually on top of
the condo.
So it was hard to find someone
to replace that air
conditioner.
And it costs a lot more than
replacing an air conditioner
in a normal home where they
wouldn't have to go on the
roof.
So think about those kinds of
costs when you were deciding
to purchase your home,
there's also yard work to be
done if you have a yard with
your place.
And I know for me,
one of my places,
there were big Cottonwood
trees in the backyard,
four of them,
and three of them were
completely dead.
One of them was pretty much
half dead.
So I had to pay to remove
those trees.
And that was thousands of
dollars.
So I wasn't really planning on
that.
I had no idea how much it
would cost to remove trees.
So there's just little things
like that that you need to be
aware of when you own a home,
you need to make sure that you
are taking care of the
landscaping,
so trees do not fall on your
house or the neighbor's house.
And the other thing is that
utilities.
And usually when you are
renting,
you're probably just paying
for gas and electric and your
own internet.
But when you own a home,
there's also a sewer charge.
There is a storm drain charge.
There's even a streetlight
charge.
You have to pay for garbage
and recycling depending on
where you live,
but they're not just two
utilities.
So keep that in mind.
There are a number of
utilities you'll have to pay
for.
And then if you buy a place in
an HOA with a homeowner's
association,
there's that extra monthly fee
that you will be charged in
order for the HOA to take care
of some of the things around
your property.
And there's also taxes,
which never go away.
Even after you pay off your
mortgage,
you will always be paying
taxes on your property.
And then don't forget about
insurance.
You want to make sure your
property is insured in case
something does happen to it,
that you just have to pay your
deductible.
And then the insurance will
take care of the rest.
And then of course,
if you take out a loan,
a mortgage loan in order to
purchase your home,
you're going to have that
monthly mortgage payment to
pay.
And if you want to know how I
was able to pay off my
mortgage early,
I have a video about that.
I'll leave a link above and
below.
So just keep in mind there are
a number of different costs
associated with owning a home.
Comment below and tell me if
you would say your home is an
asset or a liability.
And then I want to share my
thoughts on home ownership.
One of the things I really
like about owning my own home
is the security.
I don't have to worry about
someone selling the property
and then me having to move.
I know for sure that it is
mine and I can stay there as
long as I want to.
And I think when you have a
family it's even nicer to have
that security where it's just
me.
It's not so bad if I did have
to move,
but moving a whole family and
taking the kids out of school,
things like that would be a
lot harder.
So I like having that peace of
mind,
that security,
knowing that I own the place
and I don't have to move
unless I want to move.
And another item I like about
home ownership is that you can
do what you want with your
home.
You can paint the walls,
different colors if you want
to,
you can redo the flooring.
And if you don't have an HOA,
then you can even paint your
front door or do things on the
outside of the home to make it
look different.
But you have full control on
what you want to do with your
home.
No one else is saying,
no,
you can't paint the bedrooms
or upgrade anything.
And then another benefit is
you don't have that hassle of
having to move.
If the landlord does sell
their property,
then you're going to have to
pack up all of your things and
move.
And that is a lot of work.
I did that recently just last
year.
And it was a lot of work to
move all of my items because I
had a house I had fully
furnished before.
So moving all of those items
over plus finding a new place
to live can also be difficult.
So if you own your own place,
you don't have to worry about
moving.
If you've held your property
for the longterm,
it is appreciated in value,
it's gone up over the years.
So if you have your mortgage
paid off,
if you own your home outright,
you can leave that to your
heirs and someone could move
into the property and divvy it
up amongst all of your
children.
And then another option of
owning your own home is that
if you get tired of your home,
you can actually rent it out
and move into another place.
And you could even rent if you
wanted to,
or if you wanted to purchase
another property,
that could be an option,
but you could rent out your
home and then collect cashflow
every single month from that
property.
So it's up to you,
whether or not you want to
purchase a home.
And whether you define that as
an asset or a liability,
but I wanted to share these
thoughts with you so that you
can kind of see,
in what ways a home could be
an asset,
or it could be a liability.
And if you found this video
helpful,
please hit that like button
and share it with someone else
who would like to hear this
information.
And hit the subscribe button
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channel.
And if you want to see even
more content from me and make
sure and check out the videos
on the side of the screen.
Thanks so much for watching.
I'll see you in the next
video.