Very often finance and FIRE bloggers and writers state that your main residence is not an asset. That it is liability. I will disagree and I can confirm for us it is an asset and top investment which got us to FIRE. I can see why majority of FIRE bloggers think that the house is liability and not an asset. They encourage renting. Well I would like to state here reasons why I think your main residence is an asset and should be treated as an investment. Especially if you would like to retire early.

Largest investment

Your main residence is for majority of people largest expenditure in family budget. I do encourage to treat this expense with respect and focusing not only on wants but also of soundness of the purchase as an investment. Why would you then concentrate on some minor share purchase of couple of thousand dollars and ignore one of the largest outgoing in your life from the investment point of view. I know many people think it is my home and I don’t care about investment side of this purchase. That’s of course their choice, but they might be definitely missing a lot of benefits.

Let out

House can be always rented out if you move on and generate income. This can be short term as AirBnB or standard annual let through normal real estate agent. I am currently renting my previous main residence through agent long term. We use an agent for two reasons. I am currently living thousand km away from it and also it is much less hassle which is worth that 5% of rent, I am paying the agent.

Borrow against house

Often missed strategy is that you can usually borrow against the equity in your house. It can be for another property, business (careful) or holiday (I would not do this). In my case I have currently line of credit against my previous primary residence which is fully paid off. Part of this line of credit was used to purchase my current home. Another purpose of this line of credit is an emergency funds. As I am currently directing all my spare cash to pay off the line of credit, there is no unused resources available in the case of emergency. Selling house or shares is not usually suitable in minor emergency. I can always redraw some of the funds from line of credit if necessary. Interest rate is slightly above the rate of the standard mortgage but far under rates of personal loans or credit cards.

Share-mates

Your house can be always rented out by room, or by separate accommodation area while you still live there to help you with the mortgage or living expenses. I am currently having second house on my property (granny flat), which is let out. In the past I have also rented out bottom part of the house which was self-contained with own entry, bathroom and kitchen. I used to rent out rooms about a decade ago in my flat. Housemates were OK and it helped to clear the mortgage really fast.

Rent out unused area

I have rented out spare garage or car space. You can get money for storage space, work shop or paddock for horses or cows. There are many options with own property. Someone might pay you just for the opportunity to park somewhere their caravan.

Price appreciation

Value of the house can go up and down. But same like share property is generally considered good hedge against inflation. If you buy anything in the popular area, in the long term the property value should go up usually a lot faster than inflation.

Mortgage

When you get mortgage for the property get the longest one you can get. I had 30 years mortgage. I paid it off in about 7 years. As long as you can make extra repayments, longer mortgage gives you flexibility. Also once you get a mortgage, your debt is fixed, while the asset is generally rising by pace outperforming inflation.

Freedom to make changes

If you own your property you can make changes to it which can make your life there more pleasant, or even better. Your property can be changed to become better investment. Quick paint job. Building garage or car port. Adding bathroom, renovating kitchen or adding granny flat. All this usually improves value of your residence.

Downsizing

I usually recommend to buy house over an apartment. In Australia under strata system (where most of the apartments belong) you control the property but you cannot make any structural changes. In the house you have more space and freedom. Also you can downsize from the house to cheaper area, cheaper country, smaller property, flat or you can start renting. This again gives you options and flexibility which can be handy when your life takes one of expected or unexpected turns as it always does.

Australians love property

Everyone wants to own property here down under. I realise it is different to many European countries or to many parts of USA. But here everyone wants to own their main residence, own another rental property and use property in their retirement fund. Add to it favourable tax treatment, fast population growth, large cashed in neighbour and relatively small country (only 25 million people). Then you get situation gets bit out of control similarly to Canada and New Zealand.

There is no free money

I have actually employed most of these ideas. Some of them were immediately obvious and some I have learned about only during our journey. Obviously using your own house to generate income will always cause bit of hassle and problems. There is no free money as most of us have already found out. But with bit of common sense and foresight lots of the issues can be fixed, avoided or kept minimal. I used to do nightfilling in the department store while I was a student at Uni. For 20 hours of hard work per week I used to get net about $230. That was the same amount we used to get weekly for our room in the flat in Sydney. It was definitely less hassle to have housemate as compared to part time work 4 hours a day, 5 days a week, 30 min commute each way.

Everyone can decide what is important to them. But anyone buying house only for themselves, spending large on many renovations, not monetising any free rooms or areas, insisting that they will stay in the same house until they go to nursing home and generally not treating it as an investment. These people are robbing themselves of great tool which might free them from standard rat race decades faster than 99% of their coworkers.