Borrowdale Barron
grand master
Would you consider owning a house as an asset since a house comes with expenses ranging from regular maintenance and property tax each and every year?
general To What Extent Is Buying A House An Investment?
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Numero Uno
grand master
Houses increase in value over time especially when the house is well maintained or upgraded. So one of the best ways to keep money in your pocket if you decide to move, you can sale or rent the place out.
Black Panther
grand master
If owning a house is not achievement what is achieved then? Is it being a tenant?
In addition, if you have to pay rent every month and suddenly don’t have to pay rent for the rest of your life, you will understand how that feels.
In addition, if you have to pay rent every month and suddenly don’t have to pay rent for the rest of your life, you will understand how that feels.
Black Panther
grand master
You see, owning a house comes with a constant need for maintenance and that in itself will cost you money depending on how well you look after the house.
This means we have to classify your own house as a liability since it's taking money from your banking account or from your cryptocurrency wallet.
But if you own a second house and decide to put in a tenant then the that will result in you earning rental income which is an asset.
The most important thing to remember is that assets are things which increase your net worth whilst liabilities are expenses which reduce the value of your net worth.
Bla Jedza
apprentice
Okay but where does the satisfaction come from when you have to work almost all your life paying mortgage?
Black Panther
grand master
If you have ever had the goal of being a homeowner the moment you achieve that goal you will have an instant piece of mind.
There is nothing more satisfying than saying "I did it."
And that to some people is what leads them to think that they now have an asset which is true. But ONLY if they look after that house and don't sell it at a loss.
For example, suppose you bought a house which costs $1m you might sell it at around $800k depending on the market value and especially if you are under intense pressure to meet urgent financial obligations.
The final result is you would've turned your house into a bad investment with a loss of $200k.
Therefore to avoid turning your house into a bad investment you have to buy and hold forever or you have to make sure you sell it at a higher price than you originally bought it at.
Borrowdale Barron
grand master
Are there any tax deductions linked to homeownership?
Black Panther
grand master
Not really unless if you are trying to refer to home-based businesses and tax deductions?
Bla Jedza
apprentice
Does that mean when you run your business while renting you can overpay your tax compared to if you owned a house?
Black Panther
grand master
In the real world, things don't work like that.
But the main reason why some many home-based businesses end up overpaying their income taxes is due to the fact that they may not be aware of legal tax deductions which help to reduce the overall tax bill.
The best approach to go about this if you are a home-based business owner is hiring a CPA (certified public accountant) to help you out with your tax obligations so that you stay at the right side of the law.
If you are fully well versed in the area of home-based tax deductions then, of course, all is well so long as you pay your taxes on time. Nevertheless, some of these home-based tax deductions include things like:
- Leasing costs
- Car expenses
- Mobile and Internet bill
- Business Travel expenses
- Office supplies
- Meals and entertainment expenses
Borrowdale Barron
grand master
What's the main disadvantage of not claiming tax deductions for your home-based business?
Black Panther
grand master
If you don't bother to claim your tax deductions, then tax authorities will also not even bother to notify you about it.
This is why it's always encouraged to be financially literate so that you get accustomed to such things.
In a nutshell, the downside of not being aware of home-based businessperson is you will end up paying more than you should and the opportunity cost to that is you would have saved that money and used it to for further investments into your business.
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