| Author |
Message
|
| dman81 |
 Posted: Sun Jul 01, 2007 7:22 am Post subject: How the Affluent Manage Home Equity |
 |
|
Investing Sr. Associate
|
A friend at work gave me an article on how the rich tap into their home equity to create wealth. This was something new to me. Basically, if your home has significant equity, you cash out or use a home equity loan and place the funds in a conservative fund account resulting in millions saved through a period of time. I'm just imagining if those funds are placed on an S&P 500 index fund.
I have the article hosted but the host is currently down for maintenance, (a free service so I can't complain). I'll post up the links once the server goes back up.
Does anyone have experience using this technique? How can one save on taxes paid on earnings? IRA? BOND?
I am thinking that one would use a home equity loan say.... $200,000, place $150,000 on a conservative fund and use $50,000 to make payments. Then using an interest only loan, your payments are 100% tax deductible. Once the loan adjusts, you pay it off and do it again.
Another scenario I thought about was simply refinancing and cashing out.
Again using a portion for investing and the remaining to pay off the loan. I am still unclear where one would get the extra income to make payments for these types of loans but this is one way I assume.
Thank you in advance! |
|
| Back to top |
|
 |
| Im Not Warren Buffett |
| Posted: Sun Jul 01, 2007 8:08 am Post subject: Re: How the Affluent Manage Home Equity |
|
|
CFO
|
| dman81 wrote: | | A friend at work gave me an article on how the rich tap into their home equity to create wealth. This was something new to me. Basically, if your home has significant equity, you cash out or use a home equity loan and place the funds in a conservative fund account resulting in millions saved through a period of time. I'm just imagining if those funds are placed on an S&P 500 index fund. |
It sounds like you effectively want to enter the market on margin with your house as collateral. That should engender an interesting result if your investments happen to go down.  |
|
| Back to top |
|
|
| Grimreaper |
| Posted: Sun Jul 01, 2007 10:22 am Post subject: |
|
|
CFO
|
I think it's purty kewel that "da little guy" is now entering a period where he kin get one over on the banks! Looka that example I gave ov da mobile home on .62 acres that can be bought for about 1/2 ov the tax assessed value. You had a predatory lender came in offering stoopid home equity loans to fokes who couldn't pay. You git enuff fokes who can't pay and the bank ends up goin dafucnkt...Since muny still cheep another idiot bank comes in and buys out the crappy loans at a crappy price. It's a vicious cycle!...but one we MUST take advantage of!  Of course it is nuthin mo than da majic "re-cycling" of muny brought on by da Bushies...dat just be gettin stawted I might add. The next few years is gonna be a blast!...as the pendulum swings from the wealthy to da fergotten. As always, I promus ta do my best to guide da weary and weak. Why?!! Cause I'm a sooper hero!...and dat's what sooper heroes do!  |
|
| Back to top |
|
|
| Grimreaper |
| Posted: Sun Jul 01, 2007 10:29 am Post subject: Re: How the Affluent Manage Home Equity |
|
|
CFO
|
| Im Not Warren Buffett wrote: | | dman81 wrote: | | A friend at work gave me an article on how the rich tap into their home equity to create wealth. This was something new to me. Basically, if your home has significant equity, you cash out or use a home equity loan and place the funds in a conservative fund account resulting in millions saved through a period of time. I'm just imagining if those funds are placed on an S&P 500 index fund. |
It sounds like you effectively want to enter the market on margin with your house as collateral. That should engender an interesting result if your investments happen to go down. |
What really sux is what's gonna happen to da hedge fund idiots when their whole chearde unwinds. Looka dat Amarynth flunkie for instance. They give that clown a few $billion$, a room with an internut "hyper-feed", and 2 triple lattes from Scarbux and told him to go in there and stawt pressin buttons and makin us all rich! Insted da kid leverages his a$$ to the hilt in a "can't miss" seckter like  energy. No waaaay ya kin go defunckt bettin da "hot seckters" being highly leveraged. But sumhow this idiot got whacked! I hear he's back managing another fund, but this time he's bettin on "good value" crap like da housing stocks. |
|
| Back to top |
|
|
| dman81 |
| Posted: Sun Jul 01, 2007 10:32 am Post subject: Re: How the Affluent Manage Home Equity |
|
|
Investing Sr. Associate
|
| Quote: | | It sounds like you effectively want to enter the market on margin with your house as collateral. That should engender an interesting result if your investments happen to go down. |
Not if the investment vehicle is ultra conservative, and what about the S&P ? It has historically given a yield of 11%! Once that dam free server goes back up, I hope it does, I'll place a link so you guys can check out that article. |
|
| Back to top |
|
|
| Im Not Warren Buffett |
| Posted: Sun Jul 01, 2007 12:42 pm Post subject: |
|
|
CFO
|
The S&P is NOT ultra-conservative, and gambling on historical averages holding is stupid to be frank. Alot of exceptionally brilliant people tried that at LTCM and they nearly brought down the financial markets.
What happens if your investment doesn't clear your effective hurdle rate, or even worse, loses money? Then you lose your home, etc.
I would rethink this as being a really good idea or something. |
|
| Back to top |
|
|
| geb9696 |
| Posted: Sun Jul 01, 2007 3:36 pm Post subject: |
|
|
Investing VP
|
| A lot of people tried this in the town that I live in during the late 1990s-early 2000. It was really quite sad to see so many people lose all of their home equity and cash when the market went bad. You saw many people having to sell their homes because of this. |
|
| Back to top |
|
|
| dman81 |
| Posted: Sun Jul 01, 2007 7:39 pm Post subject: |
|
|
Investing Sr. Associate
|
| Quote: | Im Not Warren Buffett"]The S&P is NOT ultra-conservative, and gambling on historical averages holding is stupid to be frank. Alot of exceptionally brilliant people tried that at LTCM and they nearly brought down the financial markets.
What happens if your investment doesn't clear your effective hurdle rate, or even worse, loses money? Then you lose your home, etc.
I would rethink this as being a really good idea or something. |
Stupid? Gamble? LOL! So I guess the last 75 years have been a gamble as well on the S&P. Keep in mind, that investing on the S&P is just ONE idea, there's also CDs, MMA, (not mix martial arts)  IRAs, now the problem now would be the rates are too low to even make a profit worth while. I honestly believe this technique is a fantastic one but with the housing taking a dump, this is probably something that can be put to future use, not now. I also need to research the tax bills using this technique. Lighten up though, quit with the bearish mentality. |
|
| Back to top |
|
|
| lhutch |
| Posted: Tue Jul 10, 2007 10:43 am Post subject: If it worked |
|
|
Investing Associate
|
|
| Back to top |
|
|
| Francis |
| Posted: Fri Jul 02, 2010 9:04 am Post subject: |
|
|
Investing Sr. Associate
Joined: 10 Jun 2010
Posts: 91
This Month: 91
27406.77 e$
Net worth: 27,406.77
Portfolio Value: 0.00
Monthly Return: 0.00%
Trades this month: 0
Churn Rate: 0.00%Items
|
|
| Back to top |
|
|
|
|
 |
| Joshua13and1 |
| Posted: Mon Jul 19, 2010 1:30 am Post subject: RE: Using home as collateral for Margin investing. |
|
|
Investing Sr. Associate
Joined: 03 Jul 2010
Posts: 128
This Month: 128
3430.68 e$
Net worth: 90,631.28
Portfolio Value: 87,200.60
Monthly Return: 0.00%
Trades this month: 0
Churn Rate: 0.00%Items
|
| Doesn't look so good now does it? Probly upside down in your home and lost money on your S&P mutual fund. And what about all your closing costs. You need to make a healthly profit in order to share some of it with the bank and some of it with Uncle sam. If you aren't getting someone else to pay the mortagage for you just do your best to get rid of that debt and don't be buying a house you can't afford either. |
|
| Back to top |
|
|
| DKnightSr |
| Posted: Mon Jul 19, 2010 4:20 pm Post subject: |
|
|
Member of the Month
May
|
This would be a fool's game indeed. I believe we're in the clean up phase of just such trash as this!
The basics still hold true. Buy what you know (no, that's not Warren Buffet, that's my Grandma many years before Buffet hit the scene). Buy what you'd hang on to no matter what happened... (I have a 1989 Ford pick up love, and it still runs fine. She'll die in my garage  and the same holds true in all facets of life. Stocks, bonds, gold...whatever! I like hearing silver coins jingle. Thus, over the years I've accumulated coins. At very least they're worth their base silver, and at best....I drop them on the table just to hear them sing! LOL
Money is only a tool. It is not a game, it is not a life. Just a tool. Use it wisely, just as you would an ax. You certainly wouldn't go swinging wildly in the forest hoping to hit something....why do that in the market with money?
Oh yeah...I know someone will come along and spam over this, and there's a special place in Hades for them. Hope they enjoy it! |
|
| Back to top |
|
|
|
|
stock market game on the web. At eInvesting you compete for monthly cash prizes while you interact, make virtual dollars, purchase items, and trade in the realistic stock market simulator. We make investing FUN!
