Is Your House an Asset? A Plain Test

By Neil Solomon · 2 min read

Picture a couple named Rosa and Kent. They own their home outright. It is worth about $700,000, they are proud of it, and every month a few bills arrive for it.

One evening, Kent sorts what they own into two columns, using a simple test. In the first column goes anything that sends money to them each month. In the second goes anything that sends them a bill each month. The test comes from Robert Kiyosaki’s books, and he explains it better than I can.

Kent starts with the house. Each month it costs:

Property tax: $650.
Insurance: $250.
Upkeep: $400.
Utilities: $350.

The total is $1,650 a month. The money coming in is zero.

The house goes in the second column. A house with no mortgage still sends a bill every month.

You might say a house is where a life happens, and it may rise in value. Both are true. The test measures one thing, monthly cash. A gain on paper pays for groceries only on the day the house is sold.

Then Kent asks what would change. If Rosa and Kent rented the house for $3,200 a month and lived somewhere cheaper, the house would bring in $3,200 and still cost $1,650. It would move to the first column, sending them $1,550 a month. The walls are the same, and what the house does each month is different.

Some things sit in neither column. Land, art and a home you live in tend to hold their value over time. Many families keep their wealth in them, and in many cultures that is a deep tradition. A better name for them may be a store of value. A store of value can be a fine thing to own. The test asks a narrower question: can it pay for dinner?

For a retirement abroad, that question matters. The money you bring has to send you something each month. A paid-off house in your home country is worth a great deal on paper and sends you nothing, unless you rent it out, or sell it and move the money.

You could sort your own list. For each thing you own, you could ask whether it sends money to you or a bill to you each month, and then add up each column.

What did your house, or your biggest holding, turn out to be: a first-column item or a second-column item? Tell us in the comments. Someone reading may be about to sort theirs.