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(19-06-2015, 11:16 PM)SincereKen Wrote: In my opinion, I think personal housing needs to be split into two variables before judging on net worth; mortgage loan and rental income.
Let's assume that there is a mortgage loan pegged to the house, it will mean liability. Without mortgage loan proceed to the next step.
As for rental income, unless the owner rents out, else there is no income hence not being able to generate cash and not deemed as an asset.
Net worth may include residential stay but definitely not part of overall valuation process.
Net worth = asset - liability. Mortgage loan is the liability in the equation for housing, either primary, or investment properties.
Based on the argument of no income, thus not an asset. So cash without interest income, isn't an asset?
I am willing to take over the non-asset, with a token.
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Imo, staying in property is also an asset though that it may not provide cashflow from rental.
I treat it as longterm asset which will appreciate due to inflation. I could sell it (say 30 later for retirement) and downgrade to smaller property and gain cash proceed.
So, your staying in property may be a gold mine in years to come.
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I would consider stay-in property is an asset. Imagine if you do not have it, and need to rent from someone else. It can be a big drain in your financial future. Some people may say you need to pay interests for the property. Ofcourse you have to but the point is the property is yours.
Having ability to sell and/or deriving saving/income/future returns is an ASSET.
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20-06-2015, 09:03 PM
(This post was last modified: 20-06-2015, 09:16 PM by specuvestor.)
^^ the best description from a VB during our property discussion on the 7th measure for stayin property is "pre-paid expenses"
This "asset" can appreciate simply due to rising cost of living
Technically an asset is one that provides cash flow. That distinction separates a car for leisure use vs say for salesmen or say property agents
But you also have a lesser type of asset that focus on capital gains. These asset cannot realize value except when transacted. Market risk is higher as there is no defined payback period. That's also the argument between dividend paying and non dividend paying stocks.
Cash is unique as it is technically a depreciating asset even when put in bank as returns usually don't compensate for inflation. But this exchange medium has value in seizing opportunities. If one uses cash to buy capital gains asset, the opportunity cost can be much greater when cash is needed but market price is not right
The 3rd type of asset is typically what I termed as depreciating asset or "accounting asset". They are asset only because they are lumpy expenses but with greatly discounted after sale value, and likely tend towards zero over time. Electronics, furnishing etc and luxury items like diamonds fall into this category.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
Think Asset-Business-Structure (ABS)
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No matter how you look at your Net Worth, you are better off dead than alive. Provided all your assets are accountable. Now who says once you died you are worthless? Ha! Ha!
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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