Is a home an asset or liability?

[fasternyou929]

Originally Posted by t-rock

The way I have always been taught (by parents and as a finance major) an asset is something that will gain money for you and a liability is something that will lose you money.

I think you may have misunderstood what they were saying. I paid cash for my bike, which loses value every year. It will NEVER make me money (no matter how fast I turn laps at track days), but it is an asset because it's worth more than I owe on it.

What you stated above makes sense in an "if I sold this item right now" scenario. If it would make you money to sell it right now, it could be viewed as an asset.

IMO, of course. The real definitions of asset vs. liability are actually much less grey than that.

[anthonyk]

Originally Posted by fasternyou929

I think you may have misunderstood what they were saying. I paid cash for my bike, which loses value every year. It will NEVER make me money (no matter how fast I turn laps at track days), but it is an asset because it's worth more than I owe on it.

Actually, it's an asset because someone would give you money for it if you sold it. Totally independent of what you might owe on it.

[Homeslice]

Originally Posted by fasternyou929

it is an asset because it's worth more than I owe on it.

Even if it wasn't, it's still an asset.

Your bike is an asset, and your loan on it is a liability. They both exist simultaneously. Your bike isn't prevented from being an asset just because you have a liability (loan) on it.

[fasternyou929]

Originally Posted by anthonyk

Actually, it's an asset because someone would give you money for it if you sold it. Totally independent of what you might owe on it.

Originally Posted by Homeslice

Even if it wasn't, it's still an asset.

Your bike is an asset, and your loan on it is a liability. They both exist simultaneously. Your bike isn't prevented from being an asset just because you have a liability (loan) on it.

I get that, I'm pretty clear on the black and white definitions of asset v liability. I was trying to understand the definition as t-rock had it explained to him, or at least clear up what I think they were trying to tell him.

[101lifts2]

Originally Posted by Homeslice

Even if it wasn't, it's still an asset.

Your bike is an asset, and your loan on it is a liability. They both exist simultaneously. Your bike isn't prevented from being an asset just because you have a liability (loan) on it.

Bingo again.

[sherri_chickie]

I consider my home an asset. I would be paying just as much if not more for a rental unit and I did not buy more home that I need. The market here for the type of home I own is not dropping, and I am not house poor.

[pauldun170]

Lets revisit your question is a home an asset or liability.

Lets say I bought my house cash.
What happens to your question?

What happens in the case where the value of the home exceeds the debt obligation?
what happens to the extra?

[t-homo]

For the typical american. Bought the house at market value on a 15 - 30 year loan at 4.5 percent interest (estimated average mortgage rate).

[anthonyk]

Huh, I always figured an asset was something I could turn into money, and a liability was something that it'd take money to get rid of.

Edit: Oh, and whatever way you look at it, my house is currently making me money.

[t-homo]

I will admit, I think completely differently than most people as far as business and finance goes.