In the past I used Real Estate to grow my wealth. But today the deals are tougher and slimmer to the point that they may be high Risk. Even the Stock Market is plummeting again. So what do I do? When we are in these situations which may happen every 5-7 years it’s time to relook at what I call the Reverse Strategy.
Money Markets are paying .002 and Real Estate is high risk and the stock market is really unsafe so where do I put my money. Well it’s time to review your debt situation and the cost of that debt. Let’s say you owe $850,000 and your rate is 4.5%. There is nothing out there safe enough to offer a return even greater than .5% so take the Reverse approach and pay down debt getting you a reverse income of debt reduction at that level.
Looking at the example of investing $100,000 into the safest possible of .5Api gives you $500 per year while reducing debt at $4500 per year over a 3 year period is a $10,000 gain to your equity. The key is having no debt upon retirement but having positive cash flow from you investments and retirement vehicles. The quicker you get out of debt the faster you can start accumulating the extra free cash when the Real Estate Market has good inventory opportunities or higher Money Market rates come to play.
No debt is security alone. The Reverse Strategy is best used during the soft years and the higher returns are when you get out of the Reverse Strategy. Evaluate your returns and time out when to go in and out of your Reverse Strategy.