The accounting definition of an asset that any CPA or finance college professor would mention is that it would have to have a future economic benefit. In simple terms if you make money on something you live in, most people would call it an asset.
Single-Family Investment Property still an Asset?
The typical move-in ready single-family house will never be considered an investment by anyone who actively involved in real estate. It does not matter that your parents bought a house for two hundred thousand dollars and now it is worth over eight hundred thousand dollars in 25 years. This is pure appreciation. Yes, it would be considered as part of your net worth, but it is not an investment.
Can a Primary Residence Be an Investment?
Your personal home is usually an asset. The entire goal of house hacking is turning an ordinary expense that everyone has to normally pay, and turn it into an investment. As house hackers, we look at the primary residence and challenge the mindset that it is not an asset. Real estate is a powerful tool that can help to pay for or completely cover your housing expenses. If your primary residence is providing income, reducing normal and ordinary living expenses, or offset future expenses in the future it is an asset.
Calling house hacking an investment is odd unless if it could sustain itself completely as a rental property if you move out. It probably should be more commonly be considered as a quasi-investment since it serves multiple purposes. We are looking at cash flow and making money. The most ideal house hack is that it is self-sustaining.
House Hack Asset
We want to make sure your Assets are performing well enough that they pay for a substantial amount if not all of the expenses associated with living your home. It is recommended that 30% of your gross income is your household expenses. If your house hack covers 15% of your gross income, you are living on less right there. If the house hack does not cover all of your housing expenses, maybe it covers your utilities and food shopping bill. That is an accomplishment in and of itself. Overall if you stay on this journey of house hacking and stay motivated you will find that more of your expenses are starting to be covered.
In Conclusion
Investments do not need to make you money every month. There are many different types of investments. Some people considering coin collection an investment. You do not need to make monthly payments on coin collection. That is why cash flow is so important. If you are relying on appreciation, it is not an investment.
