How to fund your dream home

March 17, 2014 Sam Saggers

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how to fund your dream home

Home ownership is overrated. Seriously. Why own your dream home only to pay hundreds of thousands of dollars in interest for 20 to 30 years?

Of course, there is a better way to own your dream home and it doesn’t have to take two to three decades or hundreds of thousands of dollars in interest payments to do it either.

How? Buy an investment property.

Why should you buy an investment property rather than an owner occupied home?

It’s pretty simple. It all comes down to debt. Good debt versus bad debt.

Time and Money

Unless you’re independently wealthy and can pay straight up cash for your dream home, chances are you’re going to need financing, which will cost you an insane amount of cash over the life of the loan. Why pay more when you don’t have to?

To help me illustrate this, take a look at the following example. Note that even though an interest rate of 5.5% is much better than 7.5%, you will still pay a lot of money over 30 years.

$500,000 at 5.5% for 30 years

Repayments Interest Paid
Monthly  $2,838.95 $522,022.00
Weekly $654.69 $521,316.40

$500,000 at 7.5% for 30 years

Repayments Interest Paid
Monthly  $3,496.07 $758,585.20
Weekly $806.27 $757,781.20

The difference is $150 per week – that’s an extra $657 per month!

Ouch! We can knock that number down by many, many years, but first let’s talk about the difference between “good” debt and “bad” debt.

Smart Money Management

Property investments are considered good debt because of the following benefits they offer:

  • Income – Rental income can offset the costs of ownership
  • Tax deductions – A myriad of expenses such as depreciation and property management fees reduce your tax liability
  • Capital growth – Unless your home is in a property hotspot, your property’s value will be likely to grow only a little – if at all

Your primary residence is considered bad debt because of the following negatives:

  • Income – no income is derived from your home
  • Tax deductions – None
  • Capital growth – Little to none (unless in a hotspot)

Now it starts to become obvious why buying investment property is a smart move, but I’ve got even more good news. Not only will you cut taxes, enjoy capital growth and have a boost in your cash flow, you will be able to significantly reduce the balance on your home loan – paying off the loan on your dream home in as little as five to six years! Now that’s more like it!

Want to know how buying an investment property can do all this? Click here to find out how.

For even more in depth information on using investment properties to buy your dream home – come along to our next FREE Property Investor Night where you’ll receive invaluable information that you can put to use immediately! Go here to find out more!

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