Real Estate as an Asset

I am reading Rich Dad, Poor Dad and have found it very enlightening.

I have been going through refinancing of my house for some time now with little success due to the new lending guidelines and therefore have found my house to be more of a liability. As a real estate agent I have long advocated a personal residence as an asset, which in the book is clearly described as a liability.

I am left to reflect on just how my real estate -- my house -- can become an asset and have come to the following conclusion:

For a personal residence to become an asset, the monthly mortgage payment cannot exceed what the house can be rented for in any given month.

For example if you house has a rental value of $1,000/month then the mortgage should be no more than $1,000 per month.

Of course this does not actually make your house an asset because it is not paying you $1,000 per month. I'm not advocating that everyone should own a multi-unit home where the rental portion pays all of the rent. Homes are an emotional purchase and a place in which most folks find peace. What I am advocating is that if the poop hits the fan, be able to rent your house for the full mortgage to get back on your feet -- and for some this may mean camping in the meantime!

Other options for turning your house into an asset include leasing out storage space if you have a large lot or multi-car garage, convert a portion of your house or garage into office space and lease that (check zoning), or grow marketable produce and/or flowers and sell them. Just a few ideas off the cuff!

If you do plan to refinance, call Jason McHann at Clear Horizon Financial Services at 406.579.3660.