Sell Your House Now -- Invest for Later

Real Estate Broker/Owner with Open Door Auctions

Open Door Auctions Time is Money

We’re going to talk about house ownership and investing in a slightly different way here today, so hang on for the ride. The first point is that, economically speaking, having a bunch of equity vested in your house is a bad idea. At Open Door Auctions, we understand that the idea of a pile of cash growing exponentially inside a mental vault in proportion to the dwindling amount of principal left on your mortgage note gives comfort to a certain percentage of home owners. What a person often fails to take into account is that inflation constantly erodes the real value of home equity, causing it to be worth less with each passing year.

What should you do about the situation?

There are two possibilities. The first is to refinance your existing mortgage, pull out the equity, and put it into something that will actually grow your personal wealth – like more debt. Calm down now! We haven’t lost our minds. We’re talking about a very particular kind of debt. Specifically, long-term, fixed-rate debt in the form of a loan tied to a piece of income producing property is what you’re looking for. This is the only way we know of to make inflation work for you rather than against. Consider that your tenant’s rent pays the monthly bank note and, hopefully, offers positive cash flow as well, but that part isn’t critical. The critical idea is that the effect of inflation over time causes the real value of your mortgage principal to decline, which is the same as reducing the value of what you owe the bank.

That’s how to make inflation work in your favor. Conversely, if equity is left sitting in a home, which is the same as if you had stuffed cash under your mattress, inflation devalues it at the rate of about 10% annually.

Your second option is to sell the house entirely and use that equity to invest in income producing properties. You might buy a duplex, live in side side, rent out the other. You might also take some of your cash to put a down payment on a home (the minimum amount allowed by the lender) and the rest to finance as much rental real estate as possible.

We realize that some of these ideas might seem foreign at first, but you should know that this method is how Americans are still building wealth today. For a more in-depth (and free) education on the topic, visit our affiliate, the Creating Wealth Show.

The Open Door Auctions Team

Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

These are some great ideas for today's market there are plenty of investment opportunities around.

Jul 29, 2011 07:11 AM
Daniel H. Fisher (704) 617-3544 - Charlotte, NC
MCRP - Charlotte Real Estate, NC or SC

for homeowners with equity in their Charlotte NC or SC property, another option is to sell and buy a distressed property.  This could be a better location or larger property, but something that is selling at a discount to the market and that has a greater potential to increase in value faster than the neighborhood.  Positioning oneself for a faster increase when the market turns is another savvy real estate move.

Jul 29, 2011 09:17 AM