Hello all - just wanted to play out a scenario with you.
If you had the cash to purchase your dream house (Ex. $1M) and still have money left over in the bank, would you do it, or get a loan? Granted, this is not a investment play - this is a house you would plan on living in or keeping in the family for a long time.
Every "expert" who I have spoken with (at least 5 different accountants, tax attorneys and financial advisers) says that it is smarter to get a loan (especially now with the low rates), put down the least amount possible, finance at a fixed rate for as long as you can 30-45 years so you don't get killed if inflation goes up or if hyperinflation happens and the dollar is devalued, then invest the money and try to get a better return than the 3-4% loan amount.
Pros: Write off mortgage interest (might not be able to in the future), still have a TON of cash left over, if someone sues you, they get the house and mortgage, so you really only lose what you paid into the house.
Here is my issue - what if you invest in a highly diversified portfolio and you can't beat 3-4%. Or your investments lose money like how everyone got screwed in 2008 and now you are down 40% when you could have paid off your house. Now you have to go back to work to remake the money you could have used to pay your house off.
Another concern - how would you manage monthly payments and property expenses if your money is tied up in investments? By taking out money, you are messing up the principle investment.
I have run some example numbers. Mortgage on a $1M house financed at around 3% for 30 years, you will end up paying over $2M in the long run. Why pay an extra million? Would a 30 year investment yield more than that?
Even if you pay off your house, you still have to pay for property tax, expenses, insurance, etc. and deal with inflation on your cash.
Sorry for being all over the place with this.
From reading the book, MJ has his house financed (most likely so he can leverage the extra cash).
Also, is it Fastlane to depreciate the property if you classify it as a business asset (39 years)? Corporate headquarters, event venue, etc.
If you had the cash to purchase your dream house (Ex. $1M) and still have money left over in the bank, would you do it, or get a loan? Granted, this is not a investment play - this is a house you would plan on living in or keeping in the family for a long time.
Every "expert" who I have spoken with (at least 5 different accountants, tax attorneys and financial advisers) says that it is smarter to get a loan (especially now with the low rates), put down the least amount possible, finance at a fixed rate for as long as you can 30-45 years so you don't get killed if inflation goes up or if hyperinflation happens and the dollar is devalued, then invest the money and try to get a better return than the 3-4% loan amount.
Pros: Write off mortgage interest (might not be able to in the future), still have a TON of cash left over, if someone sues you, they get the house and mortgage, so you really only lose what you paid into the house.
Here is my issue - what if you invest in a highly diversified portfolio and you can't beat 3-4%. Or your investments lose money like how everyone got screwed in 2008 and now you are down 40% when you could have paid off your house. Now you have to go back to work to remake the money you could have used to pay your house off.
Another concern - how would you manage monthly payments and property expenses if your money is tied up in investments? By taking out money, you are messing up the principle investment.
I have run some example numbers. Mortgage on a $1M house financed at around 3% for 30 years, you will end up paying over $2M in the long run. Why pay an extra million? Would a 30 year investment yield more than that?
Even if you pay off your house, you still have to pay for property tax, expenses, insurance, etc. and deal with inflation on your cash.
Sorry for being all over the place with this.
From reading the book, MJ has his house financed (most likely so he can leverage the extra cash).
Also, is it Fastlane to depreciate the property if you classify it as a business asset (39 years)? Corporate headquarters, event venue, etc.
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