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Strategy 6: Create income streams to defeat debt using leverage
There is approximately three trillion dollars in non-producing capital tied up in the equity of our homes, yet we have entire generations approaching retirement with a boat load of debt and not enough income to live comfortably. This idle home equity is earning you a zero percent rate of return. With the right plan you can use your home equity to safely create income streams and eliminate your debt years early.
For years, financial planners and personal finance professionals have told homeowners that it’s unwise to separate equity and use it to invest with. However, separating equity into cash and putting in a separate account that earns a tax sheltered and compounding return has great potential for creating multiple income streams. An income producing rental property would provide immediate cash flow which you could use to pay off other debt. The interest rates over time would not affect the success of this strategy. When mortgage rates are high,. When mortgage rates are low, interest yields are low. The earnings move simultaneously.
For example, assume separating $100,000 to start earning a return inside your plan borrowed at 7.5%, and earning 7.5% conservatively. After thirty years your plan would yield one million dollars. Compared to the cost that is a pretty good return. Using self banking strategies of debt management the $100,000 could be paid off within the first 36 months with a total borrowing cost of only $18,500 at 7.5%. Any debt you have on top of that $100,000 could be paid off within seven years. What is the key? Before considering separating any equity you must ensure that the potential return substantially outdistances the potential debt service cost of the separated equity.
This is not for everyone. It requires a solid, well thought out plan with certainty. Seeking expert guidance will ensure you make sound financial decisions. For a free consultation and cost/return analysis on how you can use this strategy to defeat debt and create income streams call today at 727-502-7157, or email me at firstname.lastname@example.org.