科普小文章，请大家不要见笑。希望能对一些人有帮助。 Turn Stones and Bricks into Gold
My daughter and son-in-law bought a house for $400,000 in 2019, when they were 24 and 26. We are proud of them! Assume that they will pay off the mortgage in 15 years, which will be in 2034 (when she is 39). Assume that the house value appreciates by 4% annually, similar to the long-term national average in the U.S. in the past half a century. Then in 2034, their house value will be $400,000 x 1.04**15 = $720,377.
Here is a review on how to calculate the appreciation in value. $400,000 appreciating at 4% annually becomes: $400,000 x 1.04 = $416,000 after one year. After two years, it becomes: $400,000 x 1.04 x 1.04 = $432,640.
After 5 years, it becomes: $400,000 x 1.04 x 1.04 x 1.04 x 1.04 x 1.04 = $486,661.
After 15 years, it becomes: $400,000 x 1.04**15 = $720,377.
Since they would pay off the mortgage in 2034, then the equity in the house would be $720,377. The following are three possible options.
[1]. Option 1. From 2034 to 2062, they keep this house mortgage-free. Then my daughter retires in 2062 at the age of 67. From 2034 to 2062 is 28 years. The house value is $720,377 in 2034. Assume that the house continues to appreciate by 4% annually. Then, in 2062, the house value becomes: $720,377 x 1.04**28 = $2.2 million.
[2]. Option 2. In 2034 when they have paid off the mortgage, they do a cash-out refinance and pull out $500,000 cash. They use this cash for down payments to buy several rental houses with loans from the banks, and use rental income to pay mortgages and maintenance, etc. This will enable their invested money ($500,000) to grow at around 20% annual rate of return (as demonstrated in the book “$5 Million in 8 Years”). After several years, when these houses have accumulated more equity, they repeat the cash-out refinance and pull out more cash to buy more rental properties. In this way, they maintain a proper leverage and thus maintain the approximately 20% annual rate of return (“$5 Million in 8 Years” also describes how to minimize the risk and protect your downside, so that the up side will take care of itself).
From 2034 to 2062 is 28 years. The $500,000, growing at about 20% annually, would become by 2062: $500,000 x 1.2**28 = $82.4 million.
In addition, they still have their first house which has increased in value to $2.2 million, as shown in Option 1. Therefore, in Option 2, they will have $84.6 million in 2062 when my daughter retires.
In this way, they turn the stones and bricks and concrete of their house into gold.
[3]. Option 3. Let’s say that they want to have plenty of time to enjoy life and do not want to deal with rental properties (although, real estate investing, done in the way shown in the book “$5 Million in 8 Years”, requires only about two to three hours per week).
So, in 2034 when they have paid off the mortgage in their first and only house, they do a cash-out refinance and pull out $500,000 cash. Then they pour this $500,000 into an SP 500 index fund. Then they basically forget about it, except that they take a minute to look at it once a year to record its value (That is what I do with my 401k which is 100% invested in the SP 500). Remember, they want to have plenty of time to enjoy life.
In the short-term, the SP 500 goes up and down. However, in the long-term, from 1965-2019, with dividend reinvested, the SP 500 has had an average annual rate of return of 10%.
The $500,000, growing at 10% annually from 2034 to 2062, becomes: $500,000 x 1.1**28 = $7.2 million.
In addition, they still have their house which has increased in value to $2.2 million, as shown in Option 1. Therefore, in Option 3, they will have $9.4 million in 2062 when my daughter retires.
The dramatic differences of the three options. Of course, in Options 2 and 3, they will need to pay a monthly mortgage on the $500,000 that they take out. They will need to pay property tax and insurance on their house no matter what, even in Option 1. Hence, the difference is that they need to pay principal and interest on the $500,000 loan in Options 2 and 3. However, the principal is paid into their own pocket, because it reduces the loan owed to the bank. Depending on whether they use a 15-year-fixed or 30-year-fixed mortgage for this $500,000, in either case their payment to the bank will be less than $1 million in the 28 years from 2034 to 2062. In addition, this interest payment is tax-deductible. In contrast, there is no interest to help reduce their taxes in Option 1. Investments have tax issues, so do salaries; please contact an accountant for tax issues.
Therefore, in Option 2, they make more than $80 million extra money, compared to Option 1.
Even in Option 3, which is trouble-free and do-nothing, and suitable for an enjoyable “lazy” lifestyle, after the interest payment, they still make about $6 million extra money, compared to Option 1.
What do most home-owners do? Unfortunately, the majority of people that I know choose Option 1. Many hardworking people and friends that I know use Option 1. Years ago, a couple gave me a brochure describing how to pre-pay and pay off the home mortgage fast, in order to live mortgage-free. A few weeks ago, another good friend told me that she and her husband had been pre-paying their home mortgage and they are almost done with it, and after that, they will live a debt-free life.
These hardworking people diligently pay their mortgages, sometimes doing pre-pay, to pay off their mortgages early. Then they have a mortgage-free house, with a lot of equity in the house doing nothing. In the process, they lose the opportunity to make millions of dollars for themselves and for their loved ones.
Turn stones into gold. Thank you for reading this article; I hope it is useful to you. Please share this article with your friends, colleagues and neighbors, as this can potentially bring them substantial financial benefits of up to millions of dollars. As shown in Options 2 and 3, the equity in their house can make them millions of dollars. If they can go from Option 1 to Options 2 or 3, it can turn the stones and bricks of their house into gold. (by David Meng, author of “$5 Million in 8 Years: Real Estate Investing on the Side”)
MARCH 26, 2020 — Six of the 10 counties with the largest population gains this decade were in Texas — Harris, Tarrant, Bexar, Dallas, Collin, and Travis
Lillian Ho 乐家房东俱乐部:
https://m.youtube.com/watch?feature=youtu.be&v=Ym30AwexNW4&from=timeline
Lillian Ho 乐家房东俱乐部:
很荣幸前两天又采访了贝版老师，谈了家长很关心的子女教育话题。欢迎大家收看！
娟:
口音的话过了11-12岁再学一门语言通常会有口音。这个不做特殊例子的讨论也没有时间深究什么是“再学”的意思。自己领会或做研究。这大致就是公认的language learning critical period
TT:
那请问华人父母是怎么处理孩子identity的问题的，尤其是增强中华文化认同感这方面
Keshen:
两边文化都教，然后具体认同感交给他自己？
袁博:
大家有推荐的self-directed ira做房地产投资的吗？
Lillian Ho 乐家房东俱乐部:
https://m.youtube.com/watch?feature=youtu.be&v=ijSFsj-5Pec
Lillian Ho 乐家房东俱乐部:
贝版老师谈子女教育的下集出来啦！欢迎大家收看，喜欢就给个赞?吧？?
谢文红:
@Jennie 硅谷不是，在多伦多
lili-eastlansing:
多伦多跌很厉害最近
HuXu:
科普小文章，请大家不要见笑。希望能对一些人有帮助。 Turn Stones and Bricks into Gold
My daughter and son-in-law bought a house for $400,000 in 2019, when they were 24 and 26. We are proud of them! Assume that they will pay off the mortgage in 15 years, which will be in 2034 (when she is 39). Assume that the house value appreciates by 4% annually, similar to the long-term national average in the U.S. in the past half a century. Then in 2034, their house value will be $400,000 x 1.04**15 = $720,377.
Here is a review on how to calculate the appreciation in value. $400,000 appreciating at 4% annually becomes: $400,000 x 1.04 = $416,000 after one year. After two years, it becomes: $400,000 x 1.04 x 1.04 = $432,640.
After 5 years, it becomes: $400,000 x 1.04 x 1.04 x 1.04 x 1.04 x 1.04 = $486,661.
After 15 years, it becomes: $400,000 x 1.04**15 = $720,377.
Since they would pay off the mortgage in 2034, then the equity in the house would be $720,377. The following are three possible options.
[1]. Option 1. From 2034 to 2062, they keep this house mortgage-free. Then my daughter retires in 2062 at the age of 67. From 2034 to 2062 is 28 years. The house value is $720,377 in 2034. Assume that the house continues to appreciate by 4% annually. Then, in 2062, the house value becomes: $720,377 x 1.04**28 = $2.2 million.
[2]. Option 2. In 2034 when they have paid off the mortgage, they do a cash-out refinance and pull out $500,000 cash. They use this cash for down payments to buy several rental houses with loans from the banks, and use rental income to pay mortgages and maintenance, etc. This will enable their invested money ($500,000) to grow at around 20% annual rate of return (as demonstrated in the book “$5 Million in 8 Years”). After several years, when these houses have accumulated more equity, they repeat the cash-out refinance and pull out more cash to buy more rental properties. In this way, they maintain a proper leverage and thus maintain the approximately 20% annual rate of return (“$5 Million in 8 Years” also describes how to minimize the risk and protect your downside, so that the up side will take care of itself).
From 2034 to 2062 is 28 years. The $500,000, growing at about 20% annually, would become by 2062: $500,000 x 1.2**28 = $82.4 million.
In addition, they still have their first house which has increased in value to $2.2 million, as shown in Option 1. Therefore, in Option 2, they will have $84.6 million in 2062 when my daughter retires.
In this way, they turn the stones and bricks and concrete of their house into gold.
[3]. Option 3. Let’s say that they want to have plenty of time to enjoy life and do not want to deal with rental properties (although, real estate investing, done in the way shown in the book “$5 Million in 8 Years”, requires only about two to three hours per week).
So, in 2034 when they have paid off the mortgage in their first and only house, they do a cash-out refinance and pull out $500,000 cash. Then they pour this $500,000 into an SP 500 index fund. Then they basically forget about it, except that they take a minute to look at it once a year to record its value (That is what I do with my 401k which is 100% invested in the SP 500). Remember, they want to have plenty of time to enjoy life.
In the short-term, the SP 500 goes up and down. However, in the long-term, from 1965-2019, with dividend reinvested, the SP 500 has had an average annual rate of return of 10%.
The $500,000, growing at 10% annually from 2034 to 2062, becomes: $500,000 x 1.1**28 = $7.2 million.
In addition, they still have their house which has increased in value to $2.2 million, as shown in Option 1. Therefore, in Option 3, they will have $9.4 million in 2062 when my daughter retires.
The dramatic differences of the three options. Of course, in Options 2 and 3, they will need to pay a monthly mortgage on the $500,000 that they take out. They will need to pay property tax and insurance on their house no matter what, even in Option 1. Hence, the difference is that they need to pay principal and interest on the $500,000 loan in Options 2 and 3. However, the principal is paid into their own pocket, because it reduces the loan owed to the bank. Depending on whether they use a 15-year-fixed or 30-year-fixed mortgage for this $500,000, in either case their payment to the bank will be less than $1 million in the 28 years from 2034 to 2062. In addition, this interest payment is tax-deductible. In contrast, there is no interest to help reduce their taxes in Option 1. Investments have tax issues, so do salaries; please contact an accountant for tax issues.
Therefore, in Option 2, they make more than $80 million extra money, compared to Option 1.
Even in Option 3, which is trouble-free and do-nothing, and suitable for an enjoyable “lazy” lifestyle, after the interest payment, they still make about $6 million extra money, compared to Option 1.
What do most home-owners do? Unfortunately, the majority of people that I know choose Option 1. Many hardworking people and friends that I know use Option 1. Years ago, a couple gave me a brochure describing how to pre-pay and pay off the home mortgage fast, in order to live mortgage-free. A few weeks ago, another good friend told me that she and her husband had been pre-paying their home mortgage and they are almost done with it, and after that, they will live a debt-free life.
These hardworking people diligently pay their mortgages, sometimes doing pre-pay, to pay off their mortgages early. Then they have a mortgage-free house, with a lot of equity in the house doing nothing. In the process, they lose the opportunity to make millions of dollars for themselves and for their loved ones.
Turn stones into gold. Thank you for reading this article; I hope it is useful to you. Please share this article with your friends, colleagues and neighbors, as this can potentially bring them substantial financial benefits of up to millions of dollars. As shown in Options 2 and 3, the equity in their house can make them millions of dollars. If they can go from Option 1 to Options 2 or 3, it can turn the stones and bricks of their house into gold. (by David Meng, author of “$5 Million in 8 Years: Real Estate Investing on the Side”)
MARCH 26, 2020 — Six of the 10 counties with the largest population gains this decade were in Texas — Harris, Tarrant, Bexar, Dallas, Collin, and Travis
Lillian Ho 乐家房东俱乐部:
Lillian Ho 乐家房东俱乐部:
很荣幸前两天又采访了贝版老师，谈了家长很关心的子女教育话题。欢迎大家收看！
