5 Ways to turn your home into an Asset, not a Liability

Your home is your castle. For many, it is your biggest investment. I huge chunk of your net worth is tied to the valuation of your home. However, for most people, your home does not generate any cash flow. Many homes are actually liabilities and not assets because they require regular financial expenditure to maintain. To turn a home into an asset, you need to lower your expenses and generate income from your property so that you have a net positive cash flow which is the main characteristic of an asset.

Here are five ways to turn your home from a liability to an asset. However, please make sure whatever you are doing is in accordance with the residents’ association’s guidelines and local laws.

1. Earn rental income

One way to turn your home into an asset is to rent out a portion of your home. It could be the boy’s quarters, the basement, or another wing of the house which is unoccupied. Some remodeling may be required to create a separate entrance.

A portion of the village home that lies fallow most of the year can be rented out. Apart from earning income, there is the added advantage of having someone in the vicinity to keep an eye on things in your absence. If you have a vacation home, you can also convert it into a holiday apartment and block the days you want to use the apartment. Rental income may be enough to offset the mortgage, essentially having the house pay for itself.

If you have an undeveloped property, rather than leaving it to lie fallow, you can use the space for other purposes depending on location, e.g. events, parking, or leasing for farming.

2. Borrow on equity

Another way to turn your home into an asset is to borrow on the equity in your house to acquire another asset. If you borrow to spend on liability, you are in essence making matters worse. There are companies that offer these services of refinancing. You need to shop around to decide on the one that works best for you.

3. Start a business from home

A lot of businesses start from the garage, sitting room, or backyard. You turn your home into an asset by converting part of your home into a home office or business incubator. Although it does not put cold cash into your pocket, it saves you the money you would have spent on office rental, which can be applied to another area of the business. This however should be factored into your operating expenses, so that you price your product appropriately and also reflect it in your profit and loss accounts. Another way is to actually pay yourself the rent from your turnover, that way, money actually enters your pocket.

4. Start a yard sale

If you have an open space in front of your home, you can start a yard sale. With enough traffic from good publicity, this is a good platform to make money from things you no longer need from clothes to appliances and home furniture. You can make it a weekly affair and invite other sellers who will pay for stalls.

5. Grow your own food

If you have a big backyard, you can convert it into a back garden and plant your own crops like fruits and vegetables. This will save you money on groceries. Also, you can sell the excess to local food vendors. Depending on space and location, you can keep your own chicken, layers for example for your eggs, meat, and excess eggs for sale to local vendors.

Turn your home into an asset

You are only limited by your imagination with respect to ways you can turn your home into an asset. The main issue is to ensure that you have an underlying asset paying for each of your liabilities. Rather than fund your liabilities from your earned income (sweat and blood), create an asset that will pay for it. That way you free your capital for investing in other assets. You can turn your home into an asset so that at the end of it all, it can end up paying for itself.

Of course, this does not work for everyone. There are issues to be considered including privacy. However, if you are having cash flow challenges, this might be one of the ways of getting yourself out of the hole.