The Ultimate Financial Strategy

Let me share you the best financial strategy I know.

This one combines my two favorite investments: stocks and real estate.

It is based on a positive snowball effect where you save part of your income in the stock market. Let it grow there until you reach enough to buy a piece of real estate.

Once you get an income from real estate, you invest it back in the stock market to let it grow until you have enough for a new piece of real estate.

Because you are re-investing the money in income generating investments, it will be easier to buy new assets as time passes by.

This strategy is simple, logical and will maximize the profits made by the 2 best investments vehicles that made lot of people rich.

How to make Real Estate ownership worth it

In my previous post (http://pinoyfinancialcoach.blogspot.com/2017/09/the-modern-slave-one-with-big-house.html), I mentioned the negative effects of having a heavy mortgage to pay which I related as being the same as modern slavery.

Today, I want to focus on when owning a real estate property makes sense. Here are my thoughts:

1. The first good reason to own real estates is as rental properties. Definitely the best way to make money. It is one of the favorite investment of the super rich. Rental properties allow a steady income with minimal risks. The drawback is the initial amount to be invested that is sometimes out of reach of people. Nevertheless, with strong savings habits, patience and discipline, this can be overcome.

2. If you are sure to live in the same house for 25 years and more. The purchase of house becomes to make sense but only applies for the long term.

3. If you actively buy, fix and sell houses. This business might become lucrative if well done.

Other than that, I don't see other good reasons to own a house. The maintenance, taxes and the selling fees don't make it a very successful investment. The last 2008 housing bubble burst is a great example of how overrated homeownership is deep inside people's mind.

The modern slave: the one with a big house, therefore a big mortgage

Last August, I was able to meet many of my friends. Some of them I haven't seen for a long time.

While talking to them, I noticed the have 3 things in common:

1. They all bought a house
2. These are very big and beautiful, thus expensive

And lastly, they all need to work hard to pay for the mortgage...

It appears that their monthly mortgage is big (reaching half their monthly salary, sometimes up to 75%) and will last for 20 to 25 years. This gives them no choice: they must work hard and long to pay for it.

They are all in their mid 30s. If you add a 25 years mortgage, they'll be able to pay it off when they reach 55 years old which is to me, very long time.

In the mean time, they have to maintain this big house and these maintenance costs are substantial (especially when you have a big garden and a swimming pool).

As Robert Kiyosaki says it best: "your house is not an investment. It's a liability" and I really believe in this saying because I won't like to be obliged to work forever to pay for a house I barely can afford.

In contrast, this is my point of view towards house ownership: