Is Your House an Asset Or Liability? – Robert Kiyosaki

Is Your House an Asset Or Liability? – Robert Kiyosaki

“Is your house an asset or liability?” This question, posed by financial guru Robert Kiyosaki, has stirred significant debate and reshaped many people’s understanding of personal finance. Diving deep into the core principles of assets, liabilities, and the pivotal role of cash flow, Kiyosaki’s insights from “Rich Dad Poor Dad” challenge conventional wisdom and compel us to reexamine our financial decisions. This article delves into these groundbreaking perspectives, offering a fresh lens through which to view homeownership and its implications on our financial health.

 “Assets put money in your pocket, whether you work or not, and liabilities take money from your pocket.” – Robert Kiyosaki.

Below is a transcript from Robert Kiyosaki, teaching why your house is a liability, not an asset.

“In 1997, when I released ‘Rich Dad Poor Dad,’ that book caused a bit of an upset because I said, ‘Your house is not an asset.’ So, in today’s world, if you want to be rich, you have to know the difference between assets versus liabilities. One of the reasons so many people are struggling financially today is simply because they’re calling their liabilities assets. For example, your house is not an asset, your car is not an asset, and things like that.

So very simply, when I was a young boy, my rich dad taught me. He said, ‘You have to understand a financial statement.’ So, this is an income statement; this is the balance sheet. Now, this is overly simplified. What creates something to be an asset is very simple: assets cash flow money into your pocket, and a liability takes money from your pocket. So, for most people, their houses are not assets but liabilities because every month, it takes money to live in that house. Even those who say, ‘Well, I don’t have a debt on my house; I’ve paid it off.’ Look, you still have insurance, still have upkeep, you still have maintenance.

So let me explain this. I’m not saying don’t buy a house. What I’m saying is, if this is a house and I rent the house out, and every month it’s putting money in my pocket more than my expenses, then that house is an asset. Now, that very same house, if it goes unrented or somebody trashes it or whatever they do, that very same house can be a liability. So, a house can be an asset or a liability, depending upon the most important word in business: it’s called cash flow. Once again, if cash flows into your pocket, it’s an asset. If cash flows out, it’s a liability. Think of it this way: if you stopped working today, how much cash keeps flowing in? That’s from assets. And if cash keeps flowing out, that’s a liability.”

“So I’m not saying don’t buy a house. I’m just saying don’t call a liability an asset. And that’s what makes the Rich Dad Company different.” – Robert Kiyosaki.

What does Rich Dad Poor Dad say about real estate?

Robert Kiyosaki, best known for his book “Rich Dad Poor Dad,” has long advocated for financial education and the power of real estate as an investment vehicle. Here’s a summary of how Kiyosaki teaches to use real estate as a cash-flowing asset:

  1. Understanding Assets vs. Liabilities: At the core of Kiyosaki’s teachings, an asset puts money in your pocket, while a liability takes money out. Real estate can be a powerful asset that generates consistent cash flow when approached correctly.
  2. Leverage: Kiyosaki often speaks about the power of leverage in real estate. This means using borrowed money to finance property investments, allowing individuals to purchase properties with a small down payment and benefit from the appreciation and rental income of the entire property.
  3. Positive Cash Flow: For Kiyosaki, positive cash flow is the key to a successful real estate investment. This means that after all expenses (mortgage, taxes, maintenance, etc.), the property still generates a monthly profit from rental income.
  4. Education and Due Diligence: Kiyosaki emphasizes the importance of education and due diligence before diving into real estate. This includes understanding the market, analyzing potential deals, and surrounding oneself with knowledgeable professionals.
  5. Tax Benefits: According to Kiyosaki, one of the advantages of real estate is its tax benefits. Real estate investors can benefit from deductions, depreciation, and other tax incentives that can enhance their returns.
  6. Appreciation and Equity: While cash flow is crucial, Kiyosaki discusses the benefits of property appreciation and building equity over time. As property values increase and mortgages are paid down, investors can tap into this equity for further investments.
  7. The Power of Debt: Contrary to traditional financial advice, Kiyosaki views “good debt” – debt used to finance income-generating assets – as a tool. Real estate can be financed using debt, and if managed correctly, the income from the property can cover the debt payments and generate profit.
  8. Diversification: Kiyosaki suggests diversifying within real estate by investing in different types of properties, such as single-family homes, multi-family units, and commercial properties, depending on one’s expertise and market conditions.
  9. Continuous Learning: The real estate market is dynamic, and Kiyosaki believes in continuously updating one’s knowledge, attending seminars, reading books, and learning from mentors.
  10. Exit Strategy: Kiyosaki teaches that every real estate investment should have a clear exit strategy. Having a plan, whether selling at a particular profit margin, refinancing to pull out equity, or holding long-term for generational wealth, is crucial.

Robert Kiyosaki’s approach to real estate is holistic, emphasizing the practical and psychological aspects of investing. He believes in the power of real estate as a tool for wealth generation but also stresses the importance of education, due diligence, and strategic planning.

Key Takeaways

  • Redefining Assets and Liabilities: Robert Kiyosaki’s groundbreaking perspective in “Rich Dad Poor Dad” challenges traditional beliefs, asserting that not all possessions, like homes or cars, are genuine assets.
  • Financial Literacy Basics: Grasping the essence of financial statements, such as income statements and balance sheets, is crucial for understanding wealth accumulation.
  • The Cash Flow Principle: The true nature of an asset or liability is determined by its cash flow. If it brings money into your pocket, it’s an asset; if it drains money, it’s a liability.
  • The House Debate: While owning a house is a significant milestone, its classification as an asset or liability hinges on its ability to generate positive cash flow.
  • The Golden Word: Cash flow remains pivotal in personal finance and business, dictating whether possessions are beneficial or burdensome.


Robert Kiyosaki’s insights compel us to reevaluate our financial perspectives, especially concerning homeownership. He underscores the need to discern between genuine assets and hidden liabilities by emphasizing the importance of cash flow. In a world where financial literacy is paramount, understanding the true nature of our investments, such as houses, becomes essential. Kiyosaki’s teachings remind us that it’s not just about ownership but about our choices’ financial implications and sustainability.