It’s all about the math

Robert Kiyosaki, the author of “Rich Dad Poor Dad,” points out in his book that your owner-occupied home should not be considered an investment because even if it is free and clear, you have to pay for the taxes, insurance and maintenance. He says your home is always a liability. Now, I suppose you can get the kids to pay rent or make your home into Airbnb, but Kiyosaki’s point makes a lot of sense. An investment is an asset that produces income. I read the book – or actually listened to it on tape in my car four or five times back between 1998 and 2000 – and it really made a big difference in my financial life. I recommend this book. Now some of my readers might say, “Wait a minute, Porter, the value of our home has tripled since you helped us buy it back in 1988. What do you mean it is not an investment?” Well, think about it. If you cash in and sell it, you have to buy something else here in California unless you are willing to move to other more affordable parts of the country or maybe move down to something smaller here in the most beautiful place on Earth to live. If you sell your home for $450,000 and buy a smaller home or condo for $300,000 you could take that $150,000 gain and buy some income-producing investments like dividend-paying stocks, bonds or even a REIT that pays out income. Many people move down in size and maintenance once they retire but most of my financially successful clients don’t like what they find for $150,000 below their beloved home, and this is why some move out of state. The point is, even though your owner-occupied home rarely pays you income, based on my 35 years of experience in underwriting loans and reviewing financial statements, homeowners have a much easier time retiring with financial security because they lock in their housing expense on a fixed-rate mortgage, thus allowing them to maximize their investments in income-producing assets during their highest income producing years between ages 45 and 65. The American Dream is not just buying a house; it is working hard then retiring with dignity, financial happiness and security.