What is probably the biggest asset you have that is keeping you from creating financial freedom now? Your home! In today’s episode, Cash Flow Expert, Chris Miles, teaches how you can turn your home into a real asset that can make a MASSIVE impact in your finances RIGHT NOW. Listen up!
Chris Miles Bio:
Chris Miles, the “Cash Flow Expert,” is a leading authority on how to quickly free up and create cash flow for thousands of his clients, entrepreneurs, and others internationally! He’s an author, speaker, and radio host that has been featured in US News, CNN Money, Bankrate, Entrepreneur on Fire, and has spoken to thousands getting them fast financial results.
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Listen to the podcast here
What Huge Asset Have You Forgotten About?
My fellow Ripplers, welcome to the show. I got an event. I figured I would give you a quick shout-out and be able to give you a quick episode here that would be very valuable. If you want to see me live, especially teaching the things that I have been teaching here but in-depth, check it out and follow us. We are going to have that posted here pretty soon. The last event for 2017 is going to be this next fall. I have had a lot of people ask me, “When’s your next live event? I want to come. I feel like I need this.”
Maybe you are a business owner. You have been relatively successful. You are making good money but you are tired of that money, not making money for your retirement, and having to keep working. Maybe you are somebody who’s an employee. You have been saving on different things. Maybe you have got home equity, savings, retirement accounts, and things like that you have been using. If you have got at least over $80,000 to $100,000 in retirement accounts, savings accounts, IRAs, and things like that, you should be talking. You may not want to wait until next fall.
You are the type of person that’s going to get great value from the events that I do and that stuff. We even teach things about how to track money and how to be a wise steward of it. We teach you about tax breaks, things with investing, and how to protect yourself. We talk about all kinds of stuff even about how to create money without money and how you create money with your human capital and things like that. We will do some minor intros or light episodes of sorts here in the near future too.
I want to talk about what’s this huge asset most people forget about, or maybe they haven’t forgotten about it. They have been questioning but they are not doing anything about it. One of the biggest things I see is the difference between those that I work with and those that I don’t, or the fact of whether or not people can go and implement it. It’s hard to have the confidence to go and do something and take action on something when you don’t have somebody helping you there.
It’s interesting. I had several people meet me. One of the biggest assets they have that sometimes they forget about is their home in and of itself. If you have ever read Rich Dad Poor Dad or books by Robert Kiyosaki, he talks about your home being a liability, not an asset. Why is that? It’s not generating cashflow for you. It’s not doing anything for you. You are living in it. That’s great.
Having a home is a tremendous asset, just like your family is an asset. Click To TweetI still would call it an asset. Having a home is a tremendous asset as your family is an asset. It’s not something that you are going to be creating money from. You don’t necessarily create money from your family but I do believe that a home can be an asset if used properly. A lot of what has happened is that we have seen the real estate market go up. We have seen the real estate market get people back to where they were in the 2007 highs again. You have seen articles on that.
I’m not Nostradamus but I’m pretty sure that in many areas of the country, not all but most, there’s still going to be a little bit more uptrend of the real estate market for maybe the next year or two at least. I don’t think it’s going to go on forever. That’s for sure but I do think it’s going to continue to go up for a little bit more. People are asking, “Do I have equity? Should I sell my home? Should I keep it? What should I do?”
I want to talk about both scenarios here but I want to start by telling you a story because you have to be careful. There are two things you can do. You could sell it and buy a new home, or you could sell it and go rent. I have a client that has become a consideration. They said, “We have got equity in this home. We want to start creating some passive streams of income. Why don’t we go rent for a little bit?”
Renting is not that best the best way to make money because you don’t make any money from renting. Depending on where you are and things like that, sometimes renting could be cheaper than buying a home. It can increase your cashflow a little bit by renting. Plus, if you can get that equity to work for you, that’s fantastic, especially when you are using the equity that’s not encumbered by a home equity line of credit where you have a monthly payment. That’s money that could be pure profit.
That is an option. We talk about selling assets from time to time on the show and utilizing those assets better. That is one way to do it. Some people get investment properties. They have got equity in. Sometimes it’s worthwhile to sell it. I have had a few people where we talked, “Selling is a good option for you. You can get that equity out now and be able to turn around and use it.” That is one option.
The other option is that you can go and take out a line of credit or refinance your mortgage to where you could do a cash-out refinance depending on the situation. It will depend on whether or not you should do one or the other. That’s one thing I talk with people about often. We will look at it and say, “Maybe a home equity line of credit is the best option for you based on cashflow. For others because the interest rates are going up, maybe getting a first mortgage, doing a cash-out refinance, and doing it that way could be cheaper.” It depends on the situation and the timing.
I have had people do both. I was talking to someone on the phone that’s a potential client. We said, “You have got $450,000 of equity in this home, which is great. With that $450,000, what if you only use $300,000 of it?” I had some real estate connections go in and run some numbers. We found that we could use about $320,000 to leverage as a down payment on two fourplexes. After the mortgage payments and all the other expenses and costs are considered, the actual total net cashflow is $3,600 a month.
You have got to factor in that. If you take out about $320,000, you are probably spending in the ballpark of anywhere from $1,400 to $1,600 a month. It could be less or it could be a little bit more but it’s usually in that ballpark. Let’s say it’s about $1,500 a month, which is pretty accurate. That’s awesome because that means he’s able to leverage his equity with no extra money out of pocket, extra savings, or anything like that. He’s able to create an additional profit of over $2,000 a month. That’s huge.
I remember the first time I learned this. I was a conventional financial advisor back in the day. I remember it was at the end of 2006. For those who don’t know my story, that’s right before everything turned. I remember I met with my dad on a few occasions. He’s like, “You are a financial advisor. Why don’t you advise me? Come on,” which is interesting because I went into the business because of him. I wanted to give him his life back.
I remember looking at his stuff. With the kind of money he was making, the guy saved more than people that made twice as income into his 401(k) and such. The thing is he couldn’t do much with this 401(k) until he retired. He saved a decent amount but not even close to the amount that he would need to retire. He would have to hope to die within five years. That’s what I have to tell him. He was pretty depressed by that. He’s like, “I retire after that within five years.”
There are other creative ways to make money that are even safer than the stock market. Click To TweetI was like, “You are probably going to run out of money. You couldn’t earn enough interest to keep it going and lasting.” He’s like, “What other options do I have?” I looked at the situation and finally said, “The only other thing that you have is you have this paid-off house.” His house is completely paid off. He was proud of it. He paid it off seven years prior to that. He’s like, “I will pay this off in twenty years.”
I was pretty excited about that. He has the saver mentality, not necessarily the store mentality, to hoard all the money, try to pay things off, and things like that. He hated debt and wanted to save. This is why my perspective has turned in the last several years. I realized that perspective doesn’t necessarily lead to financial freedom because he still felt trapped. I said, “You have your home.” He’s like, “What do I do with that?” I’m like, “I don’t know.”
I ran the numbers. I’m like, “To beat the interest rates,” especially back then there were higher than they are now, “You are going to have to earn at least 5% a year.” He said, “Where do I get that?” I knew there was a place where he could probably average that but I couldn’t guarantee that he would get that over the course of five years. It was those next five years before he was trying to retire.
I was like, “There are places we could put it in but I can’t guarantee it. I could not in full integrity guarantee that.” Lo and behold, it wasn’t a matter of weeks later that I ended up jumping ship. A couple of months later, I completely left the financial advising industry but that’s when my eyes opened up. I realized there are other creative ways to be able to make money. In most cases, it is safer than the stock market and things like real estate whatnot.
He was able to leverage some of his equity. The net cashflow he was making was over $3,000 a month extra from the equity from his home. That completely changed his life, especially because he was still working and making money but now he’s got an extra $3,000 net coming in after the mortgage cost and everything. He’s able to leverage. It blew my mind. I remember I had a friend that used to teach a seminar called One Night Retirement where he would talk about using home equity.
I’m not a big fan of going overboard with this because there are risks. If you don’t invest it wisely, you can lose all of that. You are stuck with a mortgage payment and no money and income. That’s not a good place to be. You want to be in a place where it’s safe, you have control, and things like that. You have to be careful with how you do it. I have met a lot of people that have that gambler mentality that can bite them in the butt.
My advice to you is to make sure you are doing this carefully and wisely. Make sure you have real advice or counsel before you jump into something. There are lots of opportunities. If you are wondering if there are enough opportunities out there to make money, there are more than enough. There are plenty of ways. I have mentioned real estate investing. There are things like hard money lending, even lending money in general, or leveraging money to invest in certain types of assets that can produce certain returns.
Some of them were even contractual but it’s always case by case. You have got to be careful, do your homework, and do your due diligence. There are lots of ways to do it. If you have got a home that’s got equity now and maybe you are not even sure if it has equity, this might be the time to look at that. I would recommend that before you go and start playing with your money, get some advice first.
I have had some people that have gone and pulled out equity. They said, “I read some of your episodes. I remember this one. You talked about how a home could be an asset,” but I wouldn’t refund some mortgage. I went and invested in this. I have to break the news to Tom. I wouldn’t have done that. That’s horrible. That’s good but that’s just okay. You could have done better with that same money. That’s where that lost opportunity costs. Be careful. Ignorance is not bliss, especially when it comes to money. Ignorance can be expensive.
Even if you know some options, the thing is still what you don’t know could hurt you more than what you do with the money. My recommendation to you is to be wise and make sure you get the right counsel but remember that is an asset and that asset can generate income for you. If that’s your situation, it’s time to maybe look at that more. If you have got questions, shoot me an email at Chris@MoneyRipples.com and say, “This is my situation. What do you think?” We could maybe have a conversation and talk about that.
I hope this is valuable. Leave no stone unturned. Look for the things that could be potential assets in your life. This may not be a home. It could be any asset that is not being leveraged properly. Look for those opportunities because those could be the very things that create financial freedom and can get you to even have the option to retire within the next few years. That is my advice for you. Everybody go and make it a great and prosperous week. We will talk to you later.