There is an unspoken rule in the real estate market. You must have a bank mortgage to buy a home. But did you know that there is a secret way to buy a home without a mortgage?
There is a secret financial trick you can use to buy your dream home in about 8 years and have NO mortgage payment. I know this sounds ridiculous but it is true. When I write this article, most of the time, I focus on the negatives of home ownership and what to avoid when buying a home. This week I thought I would focus on the other side of the table. What to do if you do NOT have financial problems or are at risk of losing your home.
In the last few weeks I have received emails from people who are trying to get into their first home or improve their current home. I rarely get questions about what to do to save a house. So I will try to pay more attention to improving your current home. Now let’s get back to what you really want to know. How do I get a house without a mortgage? Before I tell you how to do this, remember that not having a home mortgage, while helpful, is not the answer to all your financial worries.
You will still have to pay property taxes and electricity, gas, etc. And remember I said the house of your dreams. It is not your current home, so you will most likely face higher gas, electric and utility bills. Your taxes could also be substantially higher. So if you agree with these issues, I will share my secret with you. Have you ever heard of compound or compound interest? Compounding is basically when you start with a small amount of money and allow it to accumulate over time, then take the money that has accumulated and reinvest it with the original money for an even higher return.
Over time, you can reap big profits by continuing to reinvest your profits. Well, if I haven’t gotten too technical, this composition technique can also be used for a house. You can buy a home for a lower-than-market price, stay in the home for about two years, make some minor improvements, and sell the home at a profit. This is because home values always increase over time, and when you buy a home below market value, the value increases even faster.
Take all of the proceeds from that house and put it on the next house you buy below market value as well. Do the exact same technique, by the fourth or fifth house you will have a larger house, little or no debt, and you will not have paid taxes on any of the proceeds from the sale of your other houses. The reason you will not pay taxes is because the government allows you to not pay taxes on the sale of your home if it is your primary residence for two years and you take the profit from the sale and use it for the purchase of your new home. . It is the government’s way of thanking you for stimulating the economy (selling your house and buying another).
Now I know you are probably thinking that you don’t want to move every 2 years. You don’t HAVE to move every two years, two years is just the minimum you have to be in the house to qualify for the tax exemption. This is a great technique for younger couples who don’t mind moving (especially to a bigger house) every two years. Now for the disclaimer. Before you start selling your home, check with your accountant to make sure you may qualify for this exemption. Also, this technique can seem a bit complicated. If you have questions on how to do this please email me and I can explain a bit more.
Until next time, good luck and God bless and remember … If you have any questions about saving or selling your home or any real estate topic you’d like to know more about, email me and I’ll answer your questions at this column.