Do this instead and put an extra $85,000 per year in your pocket.

I’m sure you’ve been told that it’s a good idea to pay the principal and interest on your home loan. After all, you save money on your overall debt, right? And that’s always a good thing.

Actually, the truth is, that’s very costly advice. In fact, paying off your home loan may be the most costly thing you will ever do!

Here’s why:

Let’s say you have a $400,000 loan on your home… And let’s say inflation is running at 3% per year. This means the real value of your loan would be diminished by 3% per year… or $12,000 each year.

By maintaining those borrowings and NOT paying them down, time and inflation is paying down the debt for you… at a rate of $12,000 per year. In time, what starts out to be a sizeable loan shrinks to almost nothing!

Most people can’t easily boost their income to pay an extra $12,000 down each year. However, if you let it, inflation will do the work for you.

Even though this news is startling for many real estate investors, it’s only part of the story. That’s because you also free up the money you were previously putting towards principal! And now you can use this money to secure another property.

Result: you can generate the equivalent of an extra $118,000 (before tax) each year – or roughly $2,200 every week – from this single strategy. The total cost to control this property? A measly $48 per week!

Take a look at these startling numbers and you’ll see what I am saying is true: Let’s assume your home is worth $400,000… and you have $250,000 outstanding on your home loan… and the investment property you’ve just secured is also worth $400,000 with a loan to fund it of $400,000.

Instead of paying Principal and Interest, you opt for an Interest Only loan.

And you use the money you were paying on principal on your home to add one extra property to your portfolio.

If we use an historical precedent that property values double every 7 to 10 years – and use the more conservative end of this doubling cycle – 10 years… after the 30 years you otherwise would have paid off your home… you would have two properties – your home and the investment property – and they’d be worth $3.2 million.

That’s because they each doubled 3 times in 30 years:

So by simply redirecting what would have been the principal component of your home loan repayment into an investment property… you would now control two properties – each valued at $3,200,000 – 30 years on.

The combined value of these two properties is $6,400,000; with loans against them of $250,000 and $400,000 respectively.

Net result:

$6,400,000 – $250,000 – $400,000 = $5,750,000

Compare that with having merely paid off the $250,000 debt on your home over the same 30 year period (i.e. not having invested into the second property):

$3,200,000 – Zero Debt = $3,200,000

That’s a difference of $2,550,000 – for the same outlay – but applying a different strategy!

If we divide that amount over the 30 years it took to create it… it equates to an average boost in your income of $85,000 per year. And depending on your strategy this could be tax free!

What would you need to do to increase your income by $85,000 after tax per year, every year? Get a second job? Third job? Fourth job? You probably couldn’t physically work enough hours to make an extra $85,000 per year. You would need to earn an extra $118,000 before tax to take home that extra $85,000.

And we haven’t even mentioned the rental return on your investment property. These figures would be even better.

Can you see the difference a small decision today can make in the future? A ship sailing just 1 degree off course can arrive in a different country… maybe shipwrecked!

Essentially when you analyse it, your choices boil down to this:

• Pay down the debt on your home by $47 a week or
• Increase your income by $85,000 per year.

Using the power of inflation to pay down your debt… and then your freed up cash to reinvest in even more real estate is just one of the useful (and profitable) ideas that’ll be spelled out for you in a complimentary webinar mrd offers called “Why You Must Never Pay Off Your Home Loan”.

On this webinar, you’ll discover strategies to save on capital gains taxes… fatten your nest egg and protect what’s rightfully yours. Strategies like these:

• This little known real estate strategy instantly transforms a $150 per week negatively geared property to cashflow neutral. And puts up to $39,000 in your pocket a year to boot! (Hint: has nothing to do with refinancing the loan).
• Why using your credit card to pay for investment expenses will have the taxman chasing after you. Little known mistake made by beginner investors.
• How to maximise every tax deduction you’re owed. Easy to do.
• Why most depreciation reports are WRONG. Little known strategy gets you full tax deductions while almost everybody else misses out.
• What to do to your non-deductible debt to get a tax deduction. Completely legal strategy most accountants don’t know about.
• How to prevent paying capital gains in a property that is NOT your main residence – if you do this first. Ideal for people who like to travel or work interstate.
• How to pass your investment property to your children without paying taxes. Legal loophole works a treat.
• And so much more…

As you can see, this webinar is crammed with valuable information that can have a dramatic and long-term effect on your wealth. And as part of the mrd Customer Care Program you’re invited to join in on this “information only” session as our guest – NO COST!

The date of the next “Why You Must Never Pay Off Your Home Loan” webinar is on Tuesday 7th September. To register your attendance, please follow the link to your preferred session below.

If you’re interested in taking part please act without delay. Only limited numbers of people can participate at any one time due to the restricted capacity of the webinar service mrd uses.

WHEN: Tuesday 7th September 2010 – Completed  ( Stay Tuned For Future Webinars )

Session 1:

• 7:30pm AEST – NSW, VIC, QLD, ACT & TAS
• 7:00pm ACST – SA & NT
• 5:30pm AWST – WA

Session 2:

• 9:00pm AEST – NSW, VIC, QLD, ACT & TAS
• 8:30pm ACST – SA & NT
• 7:00pm AWST – WA

Warmly,

Nick Lockhart

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