Is Home Ownership The Same As Real Estate Investing?

Robert Kiyosaki's Rich Dad, Poor Dad series of real estate investing books encourages property buyers to consider whether they should be investing they’re money in a specific piece of property or not. A good investment, as expressed by Kiyosaki, is one that will provide the investor with a good ROI in a reasonable amount of time. A strong investment is one in which there isn't a whole lot of money up front, like as repairs, to offset the money coming in from the rent.

Many people think their home is an asset, but that’s not necessarily the case. Because there’s no cash to be earned from most dwellings, most residences are liabilities. For that reason, the loan one gets to purchase a home is considered what Robert Kiyosaki calls “bad debt”. There’s only expense in this scenario – but no cash flow.

“Bad debt” (and liability) is considered undesirable to investors, in particularly since the possession of a house is an illusion. The home owner assumes that she owns a house, simply because she is paying for the claim to live in it. On the other hand, if she were to stop paying for that right, the bank would foreclose and she would be evicted immediately.

What she actually owns is equity, and equity is just a bunch of numbers. Never the less, acquire enough equity and it will morph into a property deed. Event better, it will dissolve your “bad debt”.

When one increases equity, he decreases “bad” debt. “Bad debt” is bad. Reducing bad debt helps you to make more money.

As a homeowner, we can decrease this type of “bad debt” in two ways. The most obvious way, of course, is to increase the amount paid on the principal each year, or even each month, by making more payments. It’s wise to research beforehand, however, that your mortgage does not specify forfeiture for paying early. It’s even smarter for the individual who is thinking about getting a loan, to make sure that it does not contain a stipulation like this prior to signing it in the 1st place.

Another way to reduce bad debt and increase equity is by turning a thirty-year mortgage into a fifteen-year loan through refinancing. This can mean that the homeowner is paying less interest in the long run, but paying more each month. If she can swing it, it’s a good way to accelerate equity. Making extra payments will take only one half as much time off the total time to pay the loan as refinancing will.

Reading the Rich Dad, Poor Dad book series explains to the buyer that it’s wise to study as much as they can about the transaction of purchasing and paying for real estate, because the people who stand to benefit from the buyer's ignorance will typically not reveal information. There are approaches around spending your entire existence paying for an individual piece of real estate. Considering at the process of purchasing a home, not as a resident, but as an investment property owner, will demonstrate to you that most people spend far more cash than they have to, simply because they don't know any better. Knowledge is the home owner’s greatest asset.

Article Source: http://www.propertymagnate.com/articles

Looking for MN real estate to buy or sell? Alex Anderson helps to connect buyers with MN homes for sale. Visit her website at GreatMinnesotaRealEstate dot com.

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