Is A House An Asset, Liability, Or An Expense

Many people get confused about the question that whether their house falls in the category of asset, liability, or expense. Read ahead to know the answer.

Is A House An Asset

If a person buys a house for a residential purpose then it is not an asset and it is normally classified as a liability because he will pay for a living, and if buy for a commercial purpose then it is always considered an asset because assets mean ownership and right of use.

Many people take a loan for buying a house and pay interest on it, so they considered it a liability.

If someone owns a house and it is a primary residency, he/she needs to pay the utility bills, maintenance, taxes, etc. So they considered a house as an expense.

If something takes money out of your pocket that does not mean that it is a liability but it can be an investment (Read Investable Assets). If you are paying principal and interest for acquiring the property then it is a liability until you paid it fully but once you are done with the all payments, it will become your asset.

An asset is something that one can use legally without anyone’s permission or someone who has legal ownership of something.

Liability is something that one has to pay after a specific period while the expense is the cost or money spent on something.

House hacking is the way by which you can make your residency place an asset. You can give a free area of your house on rent that will generate revenue.

FAQs

What is house hacking?

House hacking is an alternative way to generate some extra money by using primary residency.

Why a house is not an asset?

If the place is primary residency then it is not an asset because it costs for living.

Is a house a liability?

If you take a loan to buy the house and use it as your primary residency then yeah, it is a liability because it is taking money out of your pocket which meets the criteria of a liability.

Is a house an asset?

If someone bought a house for the purpose of selling it nearly in the future then it is classified as an asset.

Is a house NCA?

Yes, the house is classified as NCA (Non-Current Asset) because it takes time to convert into cash.