Home Sweet Home

Question: Is a house an asset or a liability?

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Answer: Yes

Yes, a house is an investment that might hold or even gain value that is realized when the home is sold. If you amass enough equity, you can even borrow against it and in that sense you can derive an “income” from it. From that standpoint, some experts call it the “largest asset most people own.” (Notice most of these pundits also happen to be real estate agents.)

But homes are also a bottomless hole to throw money into. Repairs, maintenance, taxes, upgrades, interest payments, insurance, PMI, potential depreciation, etc. all eat away at the profit potential of this enormous purchase that you might need decades to pay for. It’s no surprise then, that some people are so readily losing their homes.

How can a home be more of an asset than an expense?

  • Duh. Ignore the idiotic “wisdom” that says you should buy the biggest place you can afford, and instead buy the cheapest place you can manage, preferably the cheapest on the block. This will also save on property taxes, which are pegged to home value.

  • Pay a hefty down payment that avoids PMI (at least 20%), or buy the thing outright. (The tax break doesn’t put you ahead of the interest payments; not even close!)

  • Do as much repair work yourself as you can.

  • Make the thing cheaper to live in by making improvements that save energy and water.

  • If your home does go down in value by a considerable amount, get your property taxes reassessed. eHow has a handy guide for that.

  • Get someone else to help you pay for it. Some ideas:
    • Take in a roommate.

    • Move out and rent the whole thing. (Only if this will make economic sense!)

    • Be an occasional bed and breakfast, especially if you live somewhere touristy, or there’s a special event coming that fills all the hotels. You may need to check local ordinances.

    • Heading out of town for a while? Consider renting out your place for someone else’s vacation.

    • Start a home-based business. That portion of the house that is exclusively for business may be deductible from your taxes. (Check with someone who really knows what they’re talkiing about for this, so you don’t become an audit target!)

    • Sell and move into something more affordable.


Why do I bring this up? Well, this housing crisis is nowhere near over. According to a recent article on News Daily: “FHA-insured loans, which largely have replaced the subprime mortgage market, now accounts (sic) for about 25 percent of new mortgages, senior HUD officials said, versus about 2 percent of the market two years ago. At this pace, the agency will insure some 2.2 million mortgages this year.” Oy.

And the government is offering $8K for first time home buyers that originally was meant to go to the down payment, but now it can be used for anything, so the down payment can be even less. This is supposed to “stabilize” the housing market, but it’s setting people up to buy places they can’t afford.