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The Robert Kiyosaki Myth: "Your Home is Not an Asset"

Spider Man’s uncle, Ben, once told him that “With great power comes great responsibility.” So is true with “rich” and “successful” people - with fame and fortune comes great responsibility. And I think that Robert Kiyosaki should heed Peter Parker’s uncle’s advice.

Robert Kiyosaki shot to fame and fortune with his book Rich Dad Poor Dad. He may have been rich, or well-off, before the Rich Dad novel, I honestly do not know, but he definitely was not on the radar of the masses as a rich person. His Rich Dad Poor Dad book sits on my bookshelf, as it does on millions of people’s. And lately, I have been hearing his quotes being regurgitated by the new, young “influencers” on YouTube. You know, those new money social media virtuosos with followers far in excess of 100K people… and counting. However, it is one Robert Kiyosaki ideology - or should I say Robert Kiyosaki’s “rich dad’s” philosophy - that vexes me. And, that is, his ideology that your primary residence is not an asset.

Yes, I have heard at least 3 YouTube financial influencers spout this ideology while jumping out of their $300K sports car, or after flashing a bundle of money. Whether their financial riches are rented or a facade is unknown. But, what is known is that millions of people tune into these people, Robert Kiyosaki included, and latch onto every word.

Well, I am here to tell you that your house is an asset. And, I want to provide substantive and factual information to prove it.

Before I prove that your house is an asset, let me first correct Robert Kiyosaki and his “rich dad” on what an asset is. In a video that I found where he is lecturing to an audience on how to obtain financial wealth, he states “How many people have ever heard people say ‘My house is an asset’? [Audience raises their hands] Good. That’s using the wrong definition. That’s the problem. So I’ll give you the definition my rich dad gave me - you won’t find this in a regular dictionary. It’s a very simple definition because this is the guide to wealth. A definition of an asset is something that puts money in your pocket whether you work or not. That’s very simply it.”

Thus, my vexation begins. Just because someone writes a best-selling book, makes a hit record, hits the lottery, or does whatever it is they have done to become rich and famous, it does not give them the right to change standardized definitions, terms, or history, to fit their narrative.

The definition of an asset, as defined by Merriam-Webster’s dictionary, and about 99.99% of financial advisors and economists, is (1) a useful or valuable thing, person, or quality; (2) property owned by a person or company. Robert Kiyosaki and his “rich dad” are attempting to re-write the definition of an asset to give the Rich Dad methodology that he is peddling as a product a foundation to stand on. Well, I’m not buying it.

First, Kiyosaki even states that “you won’t find this in a regular dictionary.” That is correct. Because in order for his premise (your house is not an asset) to be correct, it has to have a foundation. Thus, he and his “rich dad” modified the definition of an asset to support his position.

Second, there have been several housing booms in the United States. In fact, one is occurring right now as I type this publication (google “housing boom 2021”). But, in the late 1990s and early 2000s, I had several family members and friends buy real estate in the DC metropolitan area where we all live. Then, 2-to-5 years later, they turned around and sold those homes and walked away with at least $150K dollars. Their mortgages were around $1,400 per month and they did zero (0) fixes to the properties. In fact, I had one friend buy a horrendous row house in Washington, DC on, or around, Bryant Street NW. He got the home for about $180K because it needed a lot of work. He wanted to live in the city, found the price affordable, and was willing to put in some effort to fix it up. However, after 2 or 3 years of living in the house, he realized he could get a lot of money for his home. The District was going through gentrification and prices were skyrocketing. Even my parents, who always wanted to leave DC once we were grown and move back down south, sold their property and bought a sizable house with numerous acres for a fraction of what they sold their DC residence for. And my friend was no different. He saw an opportunity to sell his house for $800K. He put about $100K in fixes into the house. He sold the home, moved to the DC suburbs (surrounding VA and MD areas), bought his dream car, got another house, and still pocketed over 6 figures. And in 2020, if you follow the real estate market like I do, you will know that it is happening again and home sellers are lovin’ it!

Another point that some of these “residential properties are not assets” converts like to throw out is that you have to have a place to live and that if you look at how much you put into a how over time it is not worth it when you sell your house. Well, I just gave you several examples to dispel the latter point. But, to their point, they do make a valid argument. If you overpay for a house, if you over-improve on a property, or if you let little problems grow into bigger ones, then yes your home may become not only a liability, but a nightmare. And, yes, we all have to live somewhere. However, try renting a house or an apartment and see what restrictions your landlord levies upon you. Better yet, try renting for 5, 10, or 20 years then go to your landlord and say “I am not going to renew my lease. Can I get the last 20 years of rent back?” Spoiler alert: it won’t work out for you. You will be lucky if your landlord gives you back your security deposit. But, with homeownership, even if you do not make back all of the years of mortgage payments and household upkeep when you sell your house, you may walk away with a nice sum of money so long as you do not keep tapping the equity in your house as if it were your bank account.

Another reason why primary residences are assets is because they can be leveraged for other financial opportunities. I personally know people that have leveraged their primary residences to obtain loans for franchises and boutique businesses that bring them residual income. When you apply for a loan (business, car, mortgage, etc.) your banker wants to know what assets you own that can cover your loan in case you default. They want to know what you have, of value, that they can confiscate should you - God forbid - default on the loan. And primary residences fall on the list of things that your banker considers as an asset.

Robert Kiyosaki has gotten so engrossed in his own success that he is willing to miseducate the masses just to make his “rich dad” empire look good. He even contradicts himself in the same lecture. While using a marker on an easel to show people how the value of the dollar has changed - we’ll talk about this too - he states that his father (I assume this is poor dad) bought a house in Hawaii in 1965 for $50K. Then, in 2005, the year this Kiyosaki video appears to be made, his father’s house is valued at $1.5M (that’s million). Then he states that his father’s house did not go up in value, but that the American dollar went down in value. Unconscionable! Even worse… he’s trying to put us in a trick bag.

This is yet another reason why rich people that are not economists or certified financial “anything” (Planner, Coach, etc.) should not dip their gold-plated toes into realms they know nothing about. The value of the dollar did not go down. The replacement value of his father’s house has gone up over the past 40 years (1965 - 2005). Given the fact that salaries have risen since then, the value that humans have placed on land, material costs, and the willingness of the consumer to pay said premiums have all gone up. If someone wanted to build a house near Robert Kiyosaki’s dad’s house in 2005, the cost to acquire the land, pay for building contractors, pay for labor (concrete, wood, electrical, plumbing, appliances, shingles, ect.) have all gone up; consequently, his father’s primary residence benefits from the inflation. The value of the dollar did not go down; our salaries and consumer tolerance thresholds have gone up. Saying the value of a dollar has gone down just because his father’s residence went from $50K to $1.5M is like saying 12 inches has gone down in units of measure because a 5-year-old that was once 38 inches tall has turned 18-years old and is now 67 inches (5-feet 7-inches) tall. The twelve inches (or 1 foot) did not go down, the kid grew up! C’mon, Robert, stop trying to finesse me.

In closing, let me just say this. Anything you buy has the potential to be an asset. In the 1980s or 1990s beanie babies were assets. These stuffed animals went from $10 to $10K due to the consumer's willingness to acquire it. In 2020, the scarcity of the PS5 is allowing people who paid the $399 and $499 MSRP to sell them for $1000 each. Even cars that were considered ordinary, or basic, cars that should continually depreciate in value are becoming antiques. Anything can become an asset, but a house is by far the biggest asset most people will ever own. But, just like with stocks, or a business venture, if you do not do your due diligence, educate yourself, control impulses to overpay for a property or over-develop it, and if you buy in poor locations then you will definitely increase the likelihood that your primary residence is an unprofitable venture.

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