In the business world there is a phrase often referred to as “living off depreciation”. Whether you're talking about equipment or land assets, the idea is the same. A simple way to define “living off depreciation” could be: The process of “milking” an asset for all it’s worth with no resources given to reinvest in the long term holding and use of the asset or The simple act of an owner leveraging the value an asset provides and repurposing it in such a way to reap the IMMEDIATE benefits until the asset is depleted. A real-world example could be a new vehicle which is driven until the “wheels fall off” only ever refueling it, never changing the oil or rotating tires or doing any preventative maintenance.

When this process is maxed out and the asset is boarder line unusable or no longer desirable then in essence it has been liquidated yet not sold. When an asset has little to no value and yet is NOT sold it becomes “junk” and now becomes a liability. Liabilities pull resources away from the main effort. The ultimate goal is always to increase assets and reduce liabilities. Where do we start to head off an asset becoming a liability? Understanding the numbers and doing the math is key.

The true cost of owning an asset is often overlooked upfront. What does it really take to build or buy that dream home by the river and enjoy it for decades? More than you could ever imagine. Knowing the costs of maintaining and using an asset is crucial for long-term success and value appreciation. Surprisingly, things like pavement, roofs, and landscaping are some of the most expensive aspects of a property. Neglecting them can lead to a huge financial setback, but if you calculate and understand them properly, they become predictable expenses that can even be welcomed.

Yes, that's right - when you truly grasp the numbers and have a solid long-term plan in place, spending money on your assets at the right time becomes something you embrace. This holds true when aligning your goals as an owner with the life cycle of your assets and applying sound financial strategies. If a pavement or roof has a 20-year life cycle, knowing where you stand in that cycle and aligning it with your goals is essential. Remember that proper depreciation (writing off costs) actually helps you keep more money if it adds value or appreciates the asset. This is how you can learn to appreciate depreciation.

By spending money at the right time and following a strategic approach, you can maximize your asset's value and get the best-selling price when it's time to let go. And this principle applies not just to property, but to all tangible assets. As it is said, “appearance is everything”, we always need to be careful how our properties and assets speak who we are to others or our Organiziation’s culture.

Today, there are various pavement options available - from decorative brick pavers to traditional asphalt and concrete. Regardless of which type you have, it's important to see them as assets that gain value over time. There's much more depth to explore on this topic, including the tactical application of maintenance strategies for pavement assets. The key takeaway here is being aware of what you have and preventing an asset from becoming a liability. In future articles, we'll delve deeper into the math behind these concepts while providing practical tips for maintaining your pavement asset. Treat your pavement like an asset, and it will continue to be one; treat it like a liability, and that's exactly what it will become.