Most of us unfortunately have an understanding that our own living house is our best asset. Nothing can be further from the truth. In fact, please ask yourself is your self occupied property an asset or a liability?
In his best selling book ‘Rich Dad Poor Dad’, Robert Kiyosaki has given the most simple definitions of assets and liabilities.
An asset is something that puts money in your pocket; a liability is something that takes money out.
Having understood what is asset and what is liability, let’s see the funniest justifications people give in favour of real estate:
1. A house as investment: If you are able to buy a house without taking home loan and are able to let it out at a decent rental yield(which is highly unlikely in India today), a house is an asset. But how many of you can do this? 😌😊
2. Tax benefits: Tax benefits on housing loan is the most overhyped incentive to buy a house. You buy a house to live and not to save taxes. There are many better alternative to save taxes. 😇🤔
3. Living on rent brings uncertainty: In fact today if you are a good tenant, your landlord will lose his sleep if you decide to vacate the property. Don’t be scared by seeing old bollywood pics where tenants are thrown out. 😌
4. Rent is an expense too: My client has a self occupied property in Kochi where his parents stay. Owing to his profession he has been working in Mumbai for last 10 years and now live in Pune. He is happy to pay rent at 2% yield and stay in a decent locality near to his office rather than becoming slave of EMIs by buying extra property right now. Following our advise he will focus on creating financial assets heavily to take care of his retirement, to create wealth and achieve other important goals.
This is it my dear readers and if even now you want to take loan and buy extra property in addition to the one you live in, I wish you luck and express a big thank you. Because it’s people like you help people like me who own HDFC limited, L&T Finance & HUDCO shares to make helluva money tax free.
“Compound interest is the eighth wonder of the world. Those who understand it earn it. Those who don’t pay it.” – Albert Einstein
Happy Investing !