Don’t Pay Off Your House – False Sense of Security – Non Performing Asset
Kris Krohn here with Limitless wealth TV and today, we’re talking about why your own personal home could end up being your worst possible investment. People, stop making terrible investments. Steven, let’s nail them right now and tell them why what I just did to you is just like what they’re doing by investing a home. – You’re beating yourself up? – Yeah, like that. – Okay. No, seriously. – Tell them, Steven. Tell them, dude Focus. – Can we get to the video? If you hit me like that again, I’m going to go ballistic. – Okay I’ll believe you this time. I do, I do. I might give you bunny ears but I’m not going to hit the back of your head again. – So, your own home. Here’s the reality.. We’ve been taught our entire lives, all of us have been taught that if we want to do something smart, if we want to be good financially speaking, we need to pay off our home. And we’re here to tell you today that paying off your home is actually one of the worst things that you can focus on early on. – Okay, now I want you to listen to what Steven just said here because he just dropped the magic on you. We’re not opposed to you paying off your house but the problem is, let’s say that you take 10, 20, 30 years and you put all of your financial focus in paying off your house, let me ask you, can you retire on a paid off house? Steven, can you retire on a paid off house? – The paid off house will never pay you. Just think about how Ludacris does is just for a moment, I want you to think about this. And we’re not the only one talking about this, I mean, Robert Kiyasaki is talking about this, Clayton Morris from Morris Invest is talking about this, everyone talks about this. We’ve been teaching this for the last 10 years at least and I’m telling you right now, paying off your home is.. Can I say it? It’s stupid if that’s what you’re focusing on first because what it does is it puts you in this false sense of security. Right, you’re paying off your home, if you take the first 30 to 48 years of your life, Kris, paying off your home, what do you have at the end? – A bank account of bricks that you can’t eat. – You have a paid off home but does your bank account of bricks pay you? – It doesn’t pay you. – Okay, is it really saving you anything really? I mean, if you have it paid off, sure, you don’t have that monthly payment – Tell them, Steven. Tell them, Steven. – But you still have your taxes, you still have your insurance, you don’t ever really own your home and when you get to the retirement age, guess what you do anyway? You take that home and you put a reverse mortgage on it. We’ll talk about that maybe later. It allows you to access some of the money you put in or you refinance that home, you take the money back out and then you go on and invest and if you’re 50, 60 years old and you’re finally getting to the point where you’re deciding to invest and you’re using that bank account of bricks and you’re reinvesting it now, you’re 4 years too late. – It’s so true. You know, this is the point that we’re really trying to make here is that there are different levels of financial security and some of you think that no debt is financial security but you know what? There’s a way higher level of financial security. Instead of no debts, it’s an income, a residual income or an income that keeps coming in. I mean, that’s why we make these videos on how to invest intelligently in real estate. Something as simple as this, you could either have a pay off house or you could have a $5,000 a month income growing for the rest of your life. Which one can you actually live off? Sure, having a paid off house means you don’t have a debt that you need to be paying on every single month but guess what? Without an income, you can’t eat, you can’t live, you can’t travel, you can’t put gas in the car, you can’t do the things that you want so when you’re talking about this idea of paid off house being a terrible investment, it really is a question of timing. Your number one main concern should not be a paid off house and being debt free. Your number one concern should be, how am I going to have enough money coming in every month of retirement that will take care of me and my family and after you have that question answered competently with a solution in place, go pay off your house all you want. Go pay it off a hundred times over but if you do it first, we’re going to call it premature and we’re going to say you did it outside of order and Steven and I, we’re young guys, we’re on our 30’s but the reality is, we have worked with thousands of people and we’ve interviewed tens of thousands of people and you know what? This is what we find.. When you get in your 50’s, 60’s and 70’s, you spent your entire life working hard to pay off that house and when you did it or if you got mostly there, right go hulk on me on this one. When you get there, it’s so unsatisfying to figure out, oh my gosh, ideally being out of debt sounds good but it doesn’t translate really well into the practical world when I need money, when I need food and so you’ll spend a lifetime paying off your house and have this bank account of bricks but you can’t cash it in unless you sell it. So here’s the sadness.. The reality is, if you spend your entire life’s work trying to get that house paid off and that’s your greatest financial accomplishment, then come retirement, the bigger problem is that that house you love so much that you paid off, you now have to get rid of it just to live for the next few years and hope that you die before you run out of money. – Yeah, this is about a complete paradigm shift and this is probably way beyond the scope of this video right here but just, the thing is, you pay off your home, that equity in your home is not paying you. That’s it. It’s a non-performing asset. Why do we continue to put our money in non-performing assets? Please from here on out, take your money out of the bank account bricks and put it somewhere where it is growing for you, where it’s building for you, where it’s paying you. This is huge. – Alright, so we’re going to end the video with the solution, okay. Instead, if you have a home and if you have any equity and whatsoever, put it to work because understand this right now, your bricks are earning rate at the rate of inflation which is usually negative through your 4% so I want you to understand that all your “I’m going to pay off my house, I’m going to pay off my house, I’m going to pay off my house.” You’re putting into a bank account earning -3% and -4%. Just think about that for a moment but instead, we’ve got solutions you could actually click on one of the sides of the video up here, the magical, mystical box thingy coming up, I think it’s over there. And what it’s going to do is, we’re going to unlighten you with options say, if you’ve got equity in a home, please, figure out your options on how you can put it to work with or without us, do something with it. Let’s just do some real quick basic math on this. If I leave my equity in my home, and that’s my retirement plan, earning -3% and also like Steven said, not paying me, let’s compare what would happen if you took $30,000, $40,000 out and put into a property paying you $500 a month. Now that $500 a month, you might have to put $200 or $300 of that back into your, into the increased mortgage because you did borrow but what do you have left over? $200 to $300 cash flow every month, a growing asset, equity in a property and with a couple of careful maneuvers like that, you can find yourself instead of investing in worst thing, you can turn your worst investment into your best investment. Everytime I buy a house, I’m always thinking, how is this home more than a home, how is it also an investment. How is it part of my plan to get where I want to go. How is it going to help aid my financial future? You can watch videos about my first home, running out the basement, covering the mortgage, walking in all that equity and then using it to buy my next, second home, third home and on and on and on. And I’ve done that with the homes that I live in, is I want my home to be a part of my investment plan for how I get where I want to go. So take your worst performing asset if you have any equity in your home and turn it into performing asset by putting that equity into work, paying you every month a residual income. So the good news is, you can take your homes that you live in over the lifetime and actually turn them into great investments, we just got to have that investor mindset. Thank you so much for joining today and watching our channel and tomorrow, I’ve got more videos coming your way so make sure that you are subscribed, ring the bell and we’ll talk to you tomorrow.