An asset is something that puts money in your pocket, a liability is something that takes money out of your pocket.”
-Robert Kiyosaki
Most personal houses cost money on a monthly basis by way of mortgage, insurance, utilities, maintenance and taxes among other things.
Q: Wait, the bank counts my house as an asset?
A: Yes it has value but, it fails to put money in your pocket on a monthly basis like a True Asset.
Q: How can I turn my house (the largest purchase most people will likely make) into a True Asset?
A: There are great options in this market to borrow against equity in your house. Equity is the difference between the mortgage balance and the current value of your home. Many people are using Home Equity Lines of Credit (HELOC) for investment purposes.
Q: But I am trying to get out of debt not further into it?
A: There is a difference between bad debt and good debt, bad debt is using that HELOC to finance a vacation or a new car purchase as these are liabilities. Good debt is using that debt to buy a True Asset that will pay for the cost of the debt and produce cash flow above and beyond. When using debt to finance investments the Canada Revenue Agency allows the deduction of the cost of the debt payments from the income it produces.
Do you have equity? Would you like to convert at least a part of your house into a True Asset? Contact us directly to have an assessment of your situation to see if we have a fit for you.