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Secret 5 : Make Your Home An Asset.

Would it surprise you to learn that I choose to rent the house I live in despite the fact I co-own more than fifty investment properties? It's true. Even though my weekly rental payments are higher than what my loan repayments would be, I still choose to rent.

Why you ask? Because renting allows me the flexibility to pursue investments without having a commitment to a long home mortgage.

Most people put the cart before the horse. They buy a house and then furnish it in such a way that they cannot afford to allocate any money towards investment. Once they have children it becomes more difficult to save. The only way to stay afloat is to work harder in their current job. This is the rat race.

Making your home an asset is number five on the list because it is more important to acquire investments and reinvest the earnings than it is to own a house. Once you have many investments providing you with multiple streams of income, then you can probably afford to pay cash for your home anyway.

Let me show you how renting allows you to accelerate your investment potential. Let’s say that you have two options. Option 1 is to rent an apartment for $280 per week. Option 2 is to buy a $180,000 apartment, which would take a deposit of $36,000 and then repayments of $245.38 per week for the next thirty years (interest at 8% fixed).

In order for renting to be a better option I need to recover $34.62 per week (the difference between the rent and house repayments). 

Remember I need a deposit of $36,000 on the purchase. If I hadn’t used that money as a deposit I could have invested it. If I had of chosen an average investment and achieved a return of 15% per annum, then my return would be $5,400 per year. 

The cost of rent above house repayments is $34.62 per week or $1,800.24 per annum. This still leaves me $3,599.76 better off ($5,400 less $1,800.24) each year. 

Over thirty years, investing that $3,599.76 at 15% interest (compounding annually) would leave me with an investment of $7,969,515.97. If I was an exceptional investor and achieved a 20% return, my new investment after thirty years would be $29,927,699.19. 

Compare that with the value of the apartment after 30 years. Being generous let’s say that the apartment’s value is tenfold what I bought it for. It is now worth $1,800,000. This is still $6,169,515.97 less than my 15% investment option.

Do you know how much interest I would have paid on the apartment loan over thirty years? $202,792.80. That’s thirty-seven and a half years rent! 

You may think that renting is dead money. It may be, but it’s insignificant compared with the amount of interest that you pay on a thirty year home loan. 

I would like to see everyone own their own home. The problem is that most people do it at the wrong time of their life and forego investment opportunities because of it. 

Secret number 5 is to transform your house from a liability into an asset. Make it a priority to have investments before committing to a long-term mortgage. 

Action Steps For Immediate Results

  1. Use the services of a mortgage reduction expert to help you develop a strategy to pay off your mortgage sooner.

  2. Invest the money you save.



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