What is an Asset
The property market in the UK is currently on uneasy ground with know one really knowing what is going to happen next and with many people speculating that we are going to be entering some sort of recession, the question, what is my property worth, is a particularly poignant one. Most people would still consider their home to be the biggest asset they own. Yet, is their home really an asset at all?
For a long time, nobody has questioned the validity of the statement that their home is an asset. Perhaps we as homeowners have been too quick to accept this statement without truly understanding what an asset is. To fully understand what an asset is in relation to property it may help to understand that an asset, in property terms, is often linked to what is known as good debt, once we understand what good debt is and its relationship with assets it will help us to have a better understanding of what true assets really are.
So, what is good debt?
Good debt is debt that you have incurred by purchasing something that appreciates in value and/or can provide you with passive income that pays for itself, and doesn't need you constantly putting money into it. What is even better is when good debt appreciates in value without costing you a penny in fact the best kind of good debt is good debt that puts money back in your pocket. In short good debt normally comes about when you have purchased a true asset, which is a product or service that meets the description above.
In this vein, your home could not be classed as an asset, because you live there and you have to pay the mortgage yourself through other means i.e. through working at your job for a wage to pay the mortgage or through the money you get from other assets. And even if you have paid off the mortgage, you would still have things to pay on the house, such as utility bills, taxes, repairs etc. So you will always need to have some income from some other means in order to finance the upkeep on your home.
However, some may class their home as a sleeping asset ready to be realised whenever they choose to cash it in or remortgage? This theory appears logical enough, yet what has to be understood is that while this sleeping asset appreciates in value, so are the other sleeping assets (houses) around it so when you want to sell and move else where, even though you may be able to sell it for much more than you bought it for, you will not be able to cash this amount in as the likelihood is that wherever you are moving to will also have increased in value by a similar amount.
The only way you will truly be able to realise the value of your property is to either move to a smaller or less expensive property, remortgage and use the equity to invest in assets that will appreciate greater than your property, or when you die and meet your maker and leave the house to a loved one, however this third option is very drastic and I would not recommend it to anyone. The taxman will not even flinch when he is taking his portion of your property pie, even before your loved ones get their hands on it.
About the Author
Carlton Johnson is an entrepreneur, property investor and author who specialises in helping others to reach their financial and personal goals through property investing and Internet marketing. For more information on property investing and developing in the UK you can visit his website at: http://www.UKPropertysuccess.com
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