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Morris Mpala, MoB Capital Ltd
IN response to D Khumalo’s (Bulawayo) question on houses and cars.

I know such statements can cause anxiety and despondency among house owners. Owning a house is considered the ultimate in life in the eyes of the investing public. It is considered a dream. The usual statement “if I buy a house I’m done” (ngingathenga indlu sengiqedile, sengingafunani futhi!)

As you have come to know, we at MoB Capital would like to bring such discussions so that we demystify and increase the understanding of such topics. Some call it controversy but we call it increasing knowledge so that we don’t perish due to lack of it. Little knowledge is very dangerous and financial ignorance has become very expensive and anything that reduces it is welcomed with both hands.

It is best to seek information and be empowered.

MoB Capital advisory desk is bringing such advice for “free” or at cost of buying the paper or accessing the Internet. This is very cost effective considering that rich people all over the world are paying a fortune to get this kind of advice since advisory is survival in the modern era. They have 24/7 financial advisers to safeguard, grow and maximise on what they already have. In other words these advisers are constantly on the lookout for information that will make them grow portfolios under their management.

Owning a house for the sake of it is no longer financially fashionable. As we know for you not to make a mistake you need to be advised accordingly. The only way to avoid making a bad investment is to be warned in advance.

And thus MoB Capital is contributing its two cents to the society through free advisory services. We have heard talk about assets and liabilities and their relevance to the struggle for financial freedom.

We have come to conclude that assets are things that we really need in order to increase our financial freedom.

One thing that is bothering people is whether a house is an asset and whether a car is a liability?

Do these help you in achieving that most sort after passive income?

An asset is supposed to earn you an income and a liability drains your financial resources. Your typical house where you live in could just be a human rights thing, that is, basic shelter. It’s fine at least it’s making you not lose money through rentals but is it making you get an income? Cruelly we ask is it making you become richer if yes then it’s an asset otherwise it’s a liability.

If it’s not making you get an income therefore it is a liability. If you are paying mortgage on it then it is draining your financial resources as well and can’t be classified as an asset. The idea of it being shelter clouds a lot.

If on the other hand it is giving you an income through rentals then it is an asset. If you can derive an income through use, for example, through working on the free land then it becomes an asset.

On whether the derived income is at optimal levels we think for now let’s park that discussion for another hot sunny day under a mango tree shade with mahewu.

The need to leverage your house so as to achieve financial benefits is what makes the house an asset. It’s no longer necessary to just have a house and look at it as an asset. It has to work for you. It needs to give you an extra income. Buying a house is an investment and investments have to pay off because the respective house has holding costs up and above the purchase price.

The way to look at it is to imagine where you could have put that money (purchase price) in such a way it could work for you. The buying price could derive an income that you then use to purchase a house without touching the capital. It’s about what is the opportunity costs associated with the purchase of a house as an investment.

It’s the reason why people are turning residences into business premises or offices or just combining purposes under one property. The idea of a multipurpose home is just to get that necessary extra leverage on the same property. Some are leveraging through using it as collateral to access cheap working capital for their businesses. It has worked and it’s encouraged if you know what you are doing.

The nice and very adorable vehicle you are driving is a liability. It’s just like groceries, it’s money down the drain. It’s costing you and you are always spending money on it in as much as it makes life comfortable just like groceries but it is a liability.

If on the other hand you use your vehicle to generate some revenues then it becomes an asset as it helps with your passive income.

We know with some household cars they tend to change each minute from being a liability to an asset as the need arise. It’s encouraged to balance the books of the house, you know.

How you purchase these assets and liabilities becomes an art that is delicate but can be mastered through coaching. The only difference between us and the rich people is they have people that they pay to do these things for them but for the rest of us we need to learn and implement it ourselves.

If you want to overcome one there is need to buy both your assets and liabilities from derived income than capital. The duty being to buy liabilities using income generated as liabilities never generate revenues. With assets it doesn’t really matter but it’s also advisable to earn the money first then spend on the asset. It is as business renowned training coaches will say a “smart way of buying”. And coming from these billionaires in the construction industry who are we to be immune to such advice.

We say know how to buy your assets and liabilities, accumulate and enjoy them.  If in doubt visit MoB Capital Advisory Desk.

Keep your questions coming and we will respond to them directly to you through Twitter, Facebook page, website chat function or through this column to the benefit of every one that might be in a similar predicament.

Through knowledge let’s get communities working again.

If you live in Bulawayo please conserve water. If you live in Zimbabwe please use electricity sparingly: sos (switch off switches). If you live on planet earth please preserve the environment.