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Rank: Member Joined: 11/17/2009 Posts: 398 Location: Where everyone knows you
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Here are my 2 cents on this topic. For me
Asset = Item of monetary value
Liability = A debt
I tend to look at my state of affairs in a different way. To me what is important is my Net Worth. I have a spreadsheet that I started many years ago that I update as of December 31 every year, after I have revalued all the assets and liabilities.
Basically you list all your major assests ( house/s, land, bank balances, investments, etc). You then list all your liabilities ( Bank loans - for house, car etc., any other money owed to anyone )
The difference is your Net Worth, and hopefuly it is a healthy black number !!!
The aim is to increase this number by your personal goal every year to eventually reach your ultimate amount by the time you retire.
My goal is to increase by 15 - 20% year on year to get to xxx million by the time I retire.
This gives me great motivation to achieve what I have personally set for myself. At a glance I can see what I need to do to get there, whether it is to earn more or spend less.
Although, I only update at the end of every year, I study it every monthly to see if I am on track.
Therefore to me my house / land = assets, as these improve my Net Worth.
Regards
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Rank: Elder Joined: 7/22/2009 Posts: 7,452
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A good read [below]. Though not Kenyan, you can learn a thing or two. No matter which country you go to, no one believes there is anything like a real estate bubble till it's too late. From Dubai to the US, people were wiped out because of the real estate bubble burst and we are still to quick to crucify anyone who dares mention the phrase "real estate bubble". The truth is, there is a huge real estate bubble in Kenya - Land, houses, apartments etc. are ridiculously over priced!!! The question is how long will it be before this bubble bursts - will it be any time soon, what might cause the bubble to burst [or not] etc. Link: Saving, Investment and Real Estate Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/10/2008 Posts: 9,131 Location: Kanjo
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MatataMingi wrote:Here are my 2 cents on this topic. For me
Asset = Item of monetary value
Liability = A debt
I tend to look at my state of affairs in a different way. To me what is important is my Net Worth. I have a spreadsheet that I started many years ago that I update as of December 31 every year, after I have revalued all the assets and liabilities.
Basically you list all your major assests ( house/s, land, bank balances, investments, etc). You then list all your liabilities ( Bank loans - for house, car etc., any other money owed to anyone )
The difference is your Net Worth, and hopefuly it is a healthy black number !!!
The aim is to increase this number by your personal goal every year to eventually reach your ultimate amount by the time you retire.
My goal is to increase by 15 - 20% year on year to get to xxx million by the time I retire.
This gives me great motivation to achieve what I have personally set for myself. At a glance I can see what I need to do to get there, whether it is to earn more or spend less.
Although, I only update at the end of every year, I study it every monthly to see if I am on track.
Therefore to me my house / land = assets, as these improve my Net Worth.
Regards
not exactly. I hope you don't count that car you drive (even if it's fully paid)as an asset on that spreadsheet.i.am.back!!!!
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Rank: Elder Joined: 7/10/2008 Posts: 9,131 Location: Kanjo
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To me, anything that takes money out of my pocket is a liability. So whether it's that stock going down the drain, or the house i live and every month I have to part with x amount for elect, security and other bills. That's why even the world billionares live in simple houses, drive down to earth cars coz they know all these are liabilitiesi.am.back!!!!
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Rank: Veteran Joined: 7/22/2011 Posts: 1,325
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Interesting discussion.
A house can be an asset, I think the poster meant your home is not an asset. Its assumed that you live in your home and do not have tenants paying you rent in it, thats why a home is not an asset, but a house can be if rented out. Contrary to popular belief, just because your house has been valued at a couple of millions, until you find a willing buyer at your stated price, the house can turn into a liability if it sits unrented and unbought for months on end. Also you have to factor in depreciation of the house.
car is definetely not an asset as it loses value the minute you drive it off the lot plus it also incurrs depreciation until it is written off
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Rank: Elder Joined: 10/9/2008 Posts: 5,389
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I believe that a house you live in is an asset that actually puts money in your pocket. And I will give an example to illustrate this:
Let's say you want to live in neighbourhood X in this example Runda and the monthly rents there are 250k. If you moved into a rented property there you will have to fork out 250k every month. If you put up a house there but refuse to move into it and rent it out, it will generate you 250k which you can use to pay your landlord. Now, if you decide to move into your own house you become your own landlord. The fact is that you still need 250 k to live in the neighbourhood but your house is paying it for you thus your net rent is zero. You can even move to a cheaper neighbourhood and pocket the difference between rental in Runda and your new place. So whether you live in your house or not, your house is an asset that will still generate the money and the issue is what you do with that money. In other words a house that you own and are living in is an asset that is contributing every month to your balance sheet the equivalent of the rent you should be paying to live in your neighbourhood.
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Rank: Veteran Joined: 3/25/2010 Posts: 939 Location: Nai
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jaggernaut wrote:I believe that a house you live in is an asset that actually puts money in your pocket. And I will give an example to illustrate this:
Let's say you want to live in neighbourhood X in this example Runda and the monthly rents there are 250k. If you moved into a rented property there you will have to fork out 250k every month. If you put up a house there but refuse to move into it and rent it out, it will generate you 250k which you can use to pay your landlord. Now, if you decide to move into your own house you become your own landlord. The fact is that you still need 250 k to live in the neighbourhood but your house is paying it for you thus your net rent is zero. You can even move to a cheaper neighbourhood and pocket the difference between rental in Runda and your new place. So whether you live in your house or not, your house is an asset that will still generate the money and the issue is what you do with that money. In other words a house that you own and are living in is an asset that is contributing every month to your balance sheet the equivalent of the rent you should be paying to live in your neighbourhood. at what point to we factor the cost of putting up that house whether you using your own money or borrowed!
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Rank: Elder Joined: 12/9/2009 Posts: 6,592 Location: Nairobi
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jaggernaut wrote:I believe that a house you live in is an asset that actually puts money in your pocket. And I will give an example to illustrate this:
Let's say you want to live in neighbourhood X in this example Runda and the monthly rents there are 250k. If you moved into a rented property there you will have to fork out 250k every month. If you put up a house there but refuse to move into it and rent it out, it will generate you 250k which you can use to pay your landlord. Now, if you decide to move into your own house you become your own landlord. The fact is that you still need 250 k to live in the neighbourhood but your house is paying it for you thus your net rent is zero. You can even move to a cheaper neighbourhood and pocket the difference between rental in Runda and your new place. So whether you live in your house or not, your house is an asset that will still generate the money and the issue is what you do with that money. In other words a house that you own and are living in is an asset that is contributing every month to your balance sheet the equivalent of the rent you should be paying to live in your neighbourhood. I don't think anyone is wrong here, it's just how you look at it or how it suits you best. For me a house I'm living in is not an asset whether owned or rented unless my intention is to sell it for a profit at a later date. That house that would make you 250k in Runda could also cost you a lot in maintenance eg electricity, water, security, repairs, land rates etc. and I don't see how it's putting 250k inside your pocket in savings unless you have another source. If you did your accounting would you record that amount as income from the house or your job?
BBI will solve it :)
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Rank: Member Joined: 6/15/2010 Posts: 126
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@2012, you have got an option of recognizing it as Rental income and expensing it as rental expense thus having a nil effect on your net position. but on the other hand if you dont have this house and you live in the same neighbourhood you will only have one entry on the expense side-rental. The money you give the landlord every month (if you don't own the house, isn't that an expense?? From whatever angle you look at it, a house is an Asset? "The trouble with not having a goal is that you can spend your life running up and down the field and never score". - Bill Copeland
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Rank: Elder Joined: 12/9/2009 Posts: 6,592 Location: Nairobi
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Edyj wrote:@2012, you have got an option of recognizing it as Rental income and expensing it as rental expense thus having a nil effect on your net position. but on the other hand if you dont have this house and you live in the same neighbourhood you will only have one entry on the expense side-rental. The money you give the landlord every month (if you don't own the house, isn't that an expense?? From whatever angle you look at it, a house is an Asset? I totally agree with you if you own the house fully but that's not the case in Kenya you'd have taken a back-breaking expensive loan of let's say 15m in the name of mortgage, you buy this house that you're not paying rent for, who do you think is better - you or the guy paying 20-30k rent and no 20yr mortgage?
BBI will solve it :)
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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2012 wrote:
I totally agree with you if you own the house fully but that's not the case in Kenya you'd have taken a back-breaking expensive loan of let's say 15m in the name of mortgage, you buy this house that you're not paying rent for, who do you think is better - you or the guy paying 20-30k rent and no 20yr mortgage?
The 20-30k rent will be 25-35 in 5 years' time.
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Rank: Elder Joined: 7/10/2008 Posts: 9,131 Location: Kanjo
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jaggernaut wrote:I believe that a house you live in is an asset that actually puts money in your pocket. And I will give an example to illustrate this:
Let's say you want to live in neighbourhood X in this example Runda and the monthly rents there are 250k. If you moved into a rented property there you will have to fork out 250k every month. If you put up a house there but refuse to move into it and rent it out, it will generate you 250k which you can use to pay your landlord. Now, if you decide to move into your own house you become your own landlord. The fact is that you still need 250 k to live in the neighbourhood but your house is paying it for you thus your net rent is zero. You can even move to a cheaper neighbourhood and pocket the difference between rental in Runda and your new place. So whether you live in your house or not, your house is an asset that will still generate the money and the issue is what you do with that money. In other words a house that you own and are living in is an asset that is contributing every month to your balance sheet the equivalent of the rent you should be paying to live in your neighbourhood. if you lost your slave (job) and are still living in this 250k a month house, and have no other source of income, yet you have to pays bills, stima, maji, watchii, community fees etc, will you still call it an asset?i.am.back!!!!
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