Use Your Personal Residence to Build a Secure Financial Future
A friend invited me over to his house the other day to talk about what he should do with his home. He was struggling with what he should do, rent it out or fix it up, sell it and take the profits.
Both options are good options, however, the 2nd option I warned him what NOT to do with the equity he's built, the profit he's made from his home appreciating in value and his mortgage being paid down.
And that is, put all the profits towards a more expensive home.
My suggestion is to NOT buy that bigger, more expensive home using all the profits you made, but go and buy a home that is much more affordable, and take the equity you've built up, your profits, which are tax free, and go and purchase a 2nd property, an investment property.
Just look at the 2 scenarios below.
As you can see, by going with scenario 1, you would have $90K to purchase an investment property, vs $30K. Plus, you wouldn't be living paycheck to paycheck trying to afford your more expensive home, where most of your income goes towards your much higher mortgage.
This alone is how you can use your personal residence to build a secure financial future. Because now you own 2 properties, and the 2nd one is being paid off not by your income, but by the renter's income whom will be living in that home.
This process can be easily repeated over and over again, allowing you to build a small real estate portfolio, as well, when you invest in cash flowing properties, you'll be putting money in your pocket each month, generating a passive income.
We will see what he does with my suggestion, but I'm hoping he listens!
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