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This books picks up from and reiterates his original book, Automatic Millionaire.
Put simply, the plan is to save for down payment with direct deposit to checking and automatic fund transfers to savings account. Be cognizant of the latte factor as you go along. Then you purchase the property, utilize equity to move to another primary residence and build equity in the second house while renting out the first one. Repeat this as many times as necessary and over a long period of time, your net-worth will be 8 figures or so.
Notes/Highlight:
Between March 2000 and the summer of 2002, the U.S. stock market imploded with losses totaling a whopping $6.9 trillion. So many Americans started investing in real estate, mainly homes (p.2). In 2005, it was reported by the Federal Reserve that Americans had much of their wealth tied up in their homes; about $10 trillion in equity (p.3).
"Don't worry about timing the market in real estate. It's time in the market that will matter for you (p.5).
You can save money by paying off your mortgage early using a "biweekly mortgage payment plan" (p.29.
In 1997, Congress changed the home-ownership tax laws. "Now, every time you sell your house,the first $250,000 in profits are tax free--the first $500,000, if you're a married couple." (p.32) ; "you can do this as often as once every two years." (p.213)
The 1031 Tax exchange is also known as the Starker Exchange "in honor of the real estate investor T.J. Starker, whose challenge to the IRS led to the rule." (p.56)
Before shopping for a home, you should shop for your mortgage. "You need to find the money first!" You're not going to get very far in the marketplace if the bank isn't willing to lend you that money (p.85). "It's not enough to be able to afford your home, you ultimately have to be able to afford your mortgage!" (p.86).
When you work with a mortgage banker, you are working with a direct lender (p.88). A mortgage broker, by contrast, doesn't work for a single bank. They are typically independent consultants, thought the may work for a large national company. The broker can shop your loan to various lenders; she doesn't represent one lender (p.89). Both mortgage bankers and mortgage brokers are usually paid a commission on the loans they close. "As a rule, it's you, the borrower [who pays the commission]-- thought you may not always realize it, since the cost of the commission is generally amortized in the cost of the loan." (p.90)
"If you already bank with a national bank (or even a local one), go into the bank and ask to meet with a loan specialist. Ask them if based on your existing 'banking relationship' with them, you qualify for any preferred rates" (p.92).
Amortization schedule=payment timetable= shows your monthly payments that will be applied against your debt (p.103).
The risk in no down payment mortgages is "if real estate values drop and you have no equity in your house, you can find yourself owing more than your place is worth! Should you be forced to sell your home under these circumstances [because, for example, you lost your job and couldn't keep up with the payments], you wouldn't be able to get enough from the sale to cover what you owe the bank (p.113)
Application Fees: To protect against the potential waste of their time, many lenders charge would-be borrowers an "application fee that ranges from $50 (the price of pulling your credit score) to $395. If the mortgage does cost, many will agree to waive the fee (p.138).
Appraisal Fees- if they are on the high side, ask why. Most lenders will offer you at least 3 different appraisers to choose from (p.139).
Pre-qualify-quick, informal review of your financial situation; is not binding (p.141)
Pre-Approved- serious and time consuming formal review of your financial situation (p.142).
In order to make the process of purchasing a home easier, many major home builders will help you with the financing (p.157).
"It's usually a lot easier to rent a new home than a old one. What's more, you're bound to experience far fewer maintenance hassles (p.160).
When you are getting pre-approved, negotiate your closing costs. By law, within three days after you have applied for a mortgage, a lender must provide you with a "good faith estimate" of what your closing costs are likely to be. Ask if the lender will guarantee a specific closing cost price. (p.172)
You are entitled to get a "HUD-1", an official, itemized statement listing all the costs of your mortgage (including closing costs, interest charges, property taxes, monthly payments, etc) , a full 24 before closing (p.173). Be sure to ask for it (p.174).
Your real estate agent can help you "Stage" a home that you're getting ready to sell (p.181).
Biweekly Mortgage Payment Plan-"All you do is take the normal 30 year mortgage you have and instead of making the monthly payments the way you normally do, you split it down the middle and pay half every two weeks." (p.192). The math works out so that you end up making less payments throughout the loan because"you gradually get further and further ahead in your payments, until by the end of the year you have paid the equivalent of not 12 but 13 monthly payments." (p.193) "To enroll all you need to do is phone your lender or go online to its web site. Many of the banks offer this service for free to customers who do all their banking with them." Banks without the service allow it through a 3rd party who will charge you, however (p.194)
Instead of the biweekly plan, you could simply "add 10% to your regular mortgage check each month and have the money applied toward the principal. Or you could make one extra payment at the end of the year and again have it go toward the principal (p.197).
Home equity loan-bank agrees to lend you the cash value of your equity. The interest is tax-deductible and is usually a lot easier to get than a mortgage (p.208). You can use a home-equity loan for any reason (college, starting a business, travel,etc.) (p.209)
"Even if you're confident a property will fetch a high enough rent to cover the costs, you still shouldn't buy it if you don't have at least three months' worth of mortgage payments in the bank." (p.228)
Put simply, the plan is to save for down payment with direct deposit to checking and automatic fund transfers to savings account. Be cognizant of the latte factor as you go along. Then you purchase the property, utilize equity to move to another primary residence and build equity in the second house while renting out the first one. Repeat this as many times as necessary and over a long period of time, your net-worth will be 8 figures or so.
Notes/Highlight:
Between March 2000 and the summer of 2002, the U.S. stock market imploded with losses totaling a whopping $6.9 trillion. So many Americans started investing in real estate, mainly homes (p.2). In 2005, it was reported by the Federal Reserve that Americans had much of their wealth tied up in their homes; about $10 trillion in equity (p.3).
"Don't worry about timing the market in real estate. It's time in the market that will matter for you (p.5).
You can save money by paying off your mortgage early using a "biweekly mortgage payment plan" (p.29.
In 1997, Congress changed the home-ownership tax laws. "Now, every time you sell your house,the first $250,000 in profits are tax free--the first $500,000, if you're a married couple." (p.32) ; "you can do this as often as once every two years." (p.213)
The 1031 Tax exchange is also known as the Starker Exchange "in honor of the real estate investor T.J. Starker, whose challenge to the IRS led to the rule." (p.56)
Before shopping for a home, you should shop for your mortgage. "You need to find the money first!" You're not going to get very far in the marketplace if the bank isn't willing to lend you that money (p.85). "It's not enough to be able to afford your home, you ultimately have to be able to afford your mortgage!" (p.86).
When you work with a mortgage banker, you are working with a direct lender (p.88). A mortgage broker, by contrast, doesn't work for a single bank. They are typically independent consultants, thought the may work for a large national company. The broker can shop your loan to various lenders; she doesn't represent one lender (p.89). Both mortgage bankers and mortgage brokers are usually paid a commission on the loans they close. "As a rule, it's you, the borrower [who pays the commission]-- thought you may not always realize it, since the cost of the commission is generally amortized in the cost of the loan." (p.90)
"If you already bank with a national bank (or even a local one), go into the bank and ask to meet with a loan specialist. Ask them if based on your existing 'banking relationship' with them, you qualify for any preferred rates" (p.92).
Amortization schedule=payment timetable= shows your monthly payments that will be applied against your debt (p.103).
The risk in no down payment mortgages is "if real estate values drop and you have no equity in your house, you can find yourself owing more than your place is worth! Should you be forced to sell your home under these circumstances [because, for example, you lost your job and couldn't keep up with the payments], you wouldn't be able to get enough from the sale to cover what you owe the bank (p.113)
Application Fees: To protect against the potential waste of their time, many lenders charge would-be borrowers an "application fee that ranges from $50 (the price of pulling your credit score) to $395. If the mortgage does cost, many will agree to waive the fee (p.138).
Appraisal Fees- if they are on the high side, ask why. Most lenders will offer you at least 3 different appraisers to choose from (p.139).
Pre-qualify-quick, informal review of your financial situation; is not binding (p.141)
Pre-Approved- serious and time consuming formal review of your financial situation (p.142).
In order to make the process of purchasing a home easier, many major home builders will help you with the financing (p.157).
"It's usually a lot easier to rent a new home than a old one. What's more, you're bound to experience far fewer maintenance hassles (p.160).
When you are getting pre-approved, negotiate your closing costs. By law, within three days after you have applied for a mortgage, a lender must provide you with a "good faith estimate" of what your closing costs are likely to be. Ask if the lender will guarantee a specific closing cost price. (p.172)
You are entitled to get a "HUD-1", an official, itemized statement listing all the costs of your mortgage (including closing costs, interest charges, property taxes, monthly payments, etc) , a full 24 before closing (p.173). Be sure to ask for it (p.174).
Your real estate agent can help you "Stage" a home that you're getting ready to sell (p.181).
Biweekly Mortgage Payment Plan-"All you do is take the normal 30 year mortgage you have and instead of making the monthly payments the way you normally do, you split it down the middle and pay half every two weeks." (p.192). The math works out so that you end up making less payments throughout the loan because"you gradually get further and further ahead in your payments, until by the end of the year you have paid the equivalent of not 12 but 13 monthly payments." (p.193) "To enroll all you need to do is phone your lender or go online to its web site. Many of the banks offer this service for free to customers who do all their banking with them." Banks without the service allow it through a 3rd party who will charge you, however (p.194)
Instead of the biweekly plan, you could simply "add 10% to your regular mortgage check each month and have the money applied toward the principal. Or you could make one extra payment at the end of the year and again have it go toward the principal (p.197).
Home equity loan-bank agrees to lend you the cash value of your equity. The interest is tax-deductible and is usually a lot easier to get than a mortgage (p.208). You can use a home-equity loan for any reason (college, starting a business, travel,etc.) (p.209)
"Even if you're confident a property will fetch a high enough rent to cover the costs, you still shouldn't buy it if you don't have at least three months' worth of mortgage payments in the bank." (p.228)
