I never advocate adding a mortgage to the owner-occupied house, because adding a mortgage to the owner-occupied house will increase bad debts and hinder loan applications for investment houses.
If you add a mortgage to an investment property and withdraw cash from the investment property, it is not considered income and does not need to be taxed. If you sell the investment property, you will have to pay capital gains tax on the profit. Therefore, if you want to hold investment properties for a long time, you must know how to increase your mortgage.
If the funds withdrawn from the mortgage are used to invest in assets without a tax shelter, the interest generated by the funds can also be tax deductible.
How can I get approval for a loan application for an investment property plus a mortgage? The formula is this: annual income If the maximum amount of the investment house loan is greater than the current loan balance of the investment house, it is likely to be approved and it is worth doing this additional mortgage. For example, if the family's annual income is 120,000, the balance of the mortgage is 150,000, and the balance of the investment house loan is 200,000, the formula is: 120,000 If the current market value of the investment house is 570,000, you can increase the loan for the investment house to 450,000 and withdraw 250,000 in cash. If the cash of 250,000 is used to repay the owner's house and consumption rather than for investment, the interest generated by the loan of 250,000 cannot be used for tax deduction; if the 250,000 is used to invest in assets under RRSP and TFSA, the interest of 250,000 cannot be used for tax deduction. You need to consult an accountant for specific tax principles. I'm just giving you some ideas. If the balance of the mortgage is 600,000, there is almost no possibility of adding a mortgage to invest in a house.
I mentioned in the 5-hour video lecture "We are forced to invest in order to balance our lifetime income" that banks are the "business community" of our real estate investment, that is, partners. Because if there is a big storm, the central bank will definitely rescue commercial banks, and it will also save us. If you look at the 2020 version of the rescue measures, you will know that commercial banks were the first to receive the largest amount of funds. When we go to the bank to add a mortgage, we are going to receive this rescue fund.
Why buy multiple apartments for investment? The core content of the "Poor Dad, Rich Dad" series of books is to remind contemporary people not to follow the example of their poor dad: when they work in a "stable" employer and their income increases, they move to a bigger house, apply for a larger mortgage, and listen to the accountant's advice. They believe that there is no capital gains tax if the home is sold. After retirement, just sell the home for retirement. This book was published in 1997. 23 years later, poor dad’s pedantic ideas are still deeply ingrained among the people. Assets are assets that can generate passive income. Self-owned housing cannot generate passive income. It is not an asset, but a huge amount of consumer goods. Investment houses are assets. No tree can reach the sky,The income from just buying one investment house is too limited, especially for families who are not good at investing in stocks and need to buy several more investment houses.
Obtaining approval for a mortgage for your first investment house is a milestone in real estate investment, because when you buy an investment house in the future, you will have to borrow even the down payment, and you don’t have to save the down payment yourself. This is the greatest advantage of capitalist countries: allowing those who can borrow money to get rich first, and they can obtain up to 10 investment house mortgage loans. This advantage makes domestic European gods and their friends drool with envy. A down payment can theoretically be used 9 times.
It can be seen from the formula for adding a mortgage to an investment property that in order to achieve the state where the down payment can be used repeatedly, the following practices need to be done:
–The balance of owner-occupied housing debt and other consumer loans cannot exceed 2.5 times the annual income.
–Maintain long-term stable income
–The amount of investment mortgage cannot be too large
–Invest in big cities where house prices continue to rise
At the same time, we need to get rid of the following bad habits:
–The debt of the owner-occupied house is overloaded, like the poor dad did who spent his whole life paying for a house loan.
—Borrow money to spend, compare, pretend to be rich
–Be careful about tax return income, especially for self-employed people and small business owners
Liang Ning gave "chemistry" a name in the product class - "alchemy". Indeed, Chinese people prefer immortality, so they have the hobby of alchemy; Westerners love money, and when the gold standard was in place, they always wanted to turn scrap copper into gold. In the process of alchemy and alchemy, humans discovered chemistry. Liang Ning said that if the chemistry class in the school was renamed as alchemy, it would greatly improve the attendance rate of students. I agree with this statement with both hands. Putting some unrelated elements together and producing unexpected results through chemical reactions is alchemy. Pressing is to mix the above unrelated financial elements, living habits, values, insights, knowledge, earning ability, etc., together, and the chemical reaction produced will be an unexpected surprise.
Borrowing money to invest has a huge advantage over saving money to invest. You can ask a bank to be a partner, and you can start investing only when you are middle-aged. You don't have to start buying stocks at the age of 11 like Buffett. Most of the losers in the stock market start too late and their expected returns are too high, causing their investments to fail. Real estate investment can be started when you have income, or you can start when your income is highest and buy it before retirement. 10 Just an investment house , as you like, banks are always waiting there quietly, waiting to cooperate with you in investing in real estate.
Conclusion: If you buy a house with cash without taking a loan, the return on real estate investment is about 4%. The higher the loan ratio, the higher the return on investment. After paying off the investment mortgage, the return on investment drops to the minimum. If I pay off the mortgage on my investment house after retirement and the return on investment drops to 4%, and if the bond yield is higher than 4%, I will definitely sell the house and buy bonds. Being a landlord is too worrying. If the bond yield is still 0.6%, there is nothing you can do but continue to hold investment properties. Look, what assets are held for retirement are determined by the rate of return. Real estate is the anchor of currency. There is real estate in every banknote. If you don’t want to be kidnapped, give it a warm hug. The transformation from industrialization to urbanization has made real estate in first-tier cities in each country increasingly scarce and expensive, with first-come, first-served, first-come-first-served. The period of highest income will not last long, and hoarding assets is what must be done after income reaches its peak. The liquidity problem in real estate can be solved by fighting fire with fire and borrowing more money to create cash redundancy. To invest in a house with a mortgage, you need to maintain a stable income and delay gratification. It is a hard work that no one can see and has God-knowing intentions. People who consume ahead of schedule and pretend to be rich cannot do it, nor can people who worry about filing taxes. Charlie Munger said that there are many good things, and all we can do is work hard to deserve them. Real estate investment is not only a cognitive upgrade, but also a life practice.
