Term Of The Day: Asset

An asset is any item that can be converted into cash. The home you own, and the securities you own are assets. On the balance sheet, the items that represents what your firm owns are assets.

PropGuide Explains Asset

An asset might have a potential value or an actual value. The home you own is an asset because you can own or control it to generate income from it. Residential property and all real estate assets are considered long-term assets. Real estate assets are also tangible assets because they have a physical existence.

The value of the assets you own might rise or decline over time. If the value of an asset rises over time, it is an appreciating asset. If the value of an asset declines over time, it is a depreciating asset. The land you own is typically an appreciating asset and the home you own is typically a depreciating asset. This means that the land on which your home stands often rise in value, while the building structure itself would decline in value. 

Real estate assets are also considered fixed assets because they would generate value for you even after a year. Current assets, on the other hand, would be consumed within a year. 

Liquid assets are stable assets that can be easily converted into cash without any lose in its value. Real estate assets are not considered liquid assets. 

Check out PropGuide's comprehensive guide to real estate terms here.

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