5%.we It’sgive whatupmakes millionaires, millionaires! say you had $100,000 of equity in of it would you want? Hopefully none. Yet, this TheLet’s home, the “opportunity” to earn a The power of leverage cost of not borrowing Learn to be your own banker. By using the your home that could be separated. Current
is home equity. It hasano ratecan of return, so it 5 percent return on the money. Let’s be clear, buying home be a great (employment cost vs.isopportunity cost) principles that banks and credit unions use, mortgage interest 5%, so the cost of that cannot go up in value, but it could go down investment. However, the wealthy buy the you can amass a fortune. A bank’s greatest money would be $5,000 per year (100% tax By separating the equity we give it new life. in value if as thelittle realofestate market declines home with their own money as or When homeowners separate equity to assets are its liabilities. You can substantially deductible). Rather than bury the $100,000 We give ourselves the opportunity to put it to possible, leaving the majority ofan their cash in the homeowner experiences uninsured reposition it in a liquid, safe,going side to account, net worthon byit.optimizing in the backyard, we are put it toa workenhance and earnyour something Assumingthe a other investments where it’s liquid, safe, and loss (e.g. an earthquake), disability, or a mortgage payment is created. Theanmortgage assets that you already have. By being your work, or “employ” it. If I were employer, 28 percent tax bracket, the net employment earning a rate of return. One of the biggest foreclosure own banker you can make an extra $1 Million why would I be willing hire an assistant payment is considered the to Employment Cost. cost for is not 5%, but 3.6%, or $3,600 per year misconceptions homeowners have is that their retirement. for $35,000 per year? The expectation is I What many people don’t understand is when home is the best investment they ever made. am going to be able to grow my business after taxes (mortgage interest is 100% tax If you purchased a home in 1990 for $250,000 we leave equity trapped in our home, we incur deductible). It’s not too difficult to find tax and earn a profit on it. As a business owner, to create an extra and sold it in June of 2003 for $600,000, that the same cost, but we call it a lost Opportunity free How or tax deferred investments earning I believe that by investing in an assistant I Let’s be clear, home the cansame be a Cost. represents a gainbuying of 140%.a During dollars fortaxretirement will earn a return that’s greater than the costmoremillion than 3.6%. Using the benefits of a period, the Dow Jones grew fromthe 2590 to 9188, great investment. However, wealthy of employing that assistant. we choose you can create your own arbitrage that’s parked in yourIfhome doing to mortgage, By repositioning $200,000 into an equity abuy gainthe of 255%. realityashere is that homeThewith little of financing their The money leave the $100,000 of equity in our home, by management borrowing at one rate and earning account with a financial advisor nothing could be put to work earning you your was the investment decision own home money as best possible, leaving the we incur almost the same cost. The only you can achieve a net gain of $1 million investment returns at a slightly higher rate. that you ever made. When you purchased the something. majority of their cash in other investments difference is, instead of referring to that cost over thirty years.and Assume separate the It’s what the banks credityou unions do all $250,000 house in 1990, you only put $50,000 employment cost, it is referred to as an where it’s liquid, safe, and earning a rate of Let’sassay $200,000 homeour equity usingata2% mortgage you had $100,000 of equity in down. The $50,000 cash investment produced a They of borrow money and opportunity cost. By leaving the equity in thethe time. return. One of the biggest misconceptions with a 5% interest rate. If the $200,000 your home that could be separated. Current profit of $350,000. That is a total return of 600%, then loan it back to us at 5%. It’s what makes home, we give up the “opportunity” to earn a grows at a conservative rate of 6.75% per homeowners have is that home is mortgage far outpacing the measly 255%their earned by the interest is on 5%,thesomoney. the cost of that millionaires, millionaires! Learn to be your 5 percent return it will be worth $1,419,275 in 30 years. the best investment they ever made. If you money stock market. would be $5,000 per year (100% tax ownyear, banker. By using the principles that After deducting the $216,000 in interest purchased a home in 1990 for $250,000 deductible). Ratherthe thanequity bury the $100,000 By separating we give it newinlife. banks and credit unions use, you can amass payments and the $200,000 mortgage, you and sold it inofJune 2003 for $600,000, the backyard, The cost notofborrowing we are going put it to work, or it toa fortune. We give ourselves the to opportunity to put A $1,003,275 bank’s greatest assetsaccount. are itsA still have left in your that represents acost gainvs. of 140%. During cost) the “employ” work it. and on why it. Assuming If Iearn weresomething an employer, would I a liabilities. (employment opportunity net gain over one million enhance dollars. your Youofcan substantially same period, the Dow Jones grew from be willing 28 percent employment to hiretax anbracket, assistantthe fornet $35,000 per net worth by optimizing the assets that you When homeowners separate equity to reposition is not 5%, but 3.6%, or $3,600 per year 2590 to 9188, a gain of 255%. The reality year?cost The expectation is I am going to be able Thishave. example simplyyour shows timeyou already By being owna one banker it in a liquid, safe, side account, a mortgage after taxes (mortgage interest is 100% tax here is that financing your home was the to grow repositioning of equity. Imagine how the my business and earn a profit on it. As an extra $1 Million for retirement. payment is created. The mortgage payment is deductible). It’s not too difficult to find tax can make best investment decision that you ever a business numbers grow for individuals that harvest owner, I believe that by investing in considered the Employment Cost. What many free or tax deferred investments earning and reposition their home equity every 5 made. When you purchased the $250,000 an assistant I will earn a return that’s greater people don’t understand is when we leave more than 3.6%. Using the tax benefits years as their home continues to appreciate! house in 1990, you only put $50,000 down. equity trapped in our home, we incur the same thanofthe cost of employing that assistant. a mortgage, you can create your ownIf This is how the wealthy manage their home The $50,000 investment produced cost, but we callcash it a lost Opportunity Cost. a we choose to leave the $100,000 equity arbitrage by borrowing at oneofrate and in equity to continually increase their net worth. profit of $350,000. That is a total return of our home, earningweinvestment returns at a slightly incur almost the same cost. The Conversely, if the same $200,000 $200,000 into an were equityleft The money that’s parked in your255% homeearned 600%, far outpacing the measly rate.is, It’sinstead what the andtocredit only higher difference of banks referring that By repositioning to sit idle in the home for 30 years, it would doing could be put to work earning you account with a financial advisor by the nothing stock market. unions do all thecost, time.it They borrow ouran management cost as employment is referred to as not have earned a dime. something. money at 2% and then loan it back to us at you can achieve a net gain of $1 million
The power of leverage
How to create an extra million dollars for retirement
opportunity cost. By leaving the equity in the