208. Become millionaire in 10 years time - Sell your house (with mortgage) and use cash to cover your expensive credit card debt and invest into the stock markets for 10 years
This idea is genius!
As you know, many people have a mortgage on their house (primary family home for example)
Like you paid off 10 years, 15 years or 20 years of mortgage payments, so you still have to pay 20, 15 or 10 years of mortgage payments.
Suppose your house is valued $300,000. You pay a mortgage of let's say $1,000 per month.
Then, after 10 years of payments for example, you purchased your house for $200,000 10 years ago and 30% of mortage payments are paid, home equity in the house.
You rent out the house for $2,000 per month. You find a tenant who pays double your mortgage price.
Then, you sell your house for $400,000 as an investment property, as you already have a renter for $2,000 per month. Or you turn a 3-bedroom house into a 4-bedroom house by turning the attic into a bedroom so you sell the house at higher price. You even have people who turn their garage into a bedroom!
And a fully furnished house is worth $20-$30,000 more than an unfurnished house!
So you make $200,000 profit (you purchased the house 10 years ago for $200,000 and you sell it for $200,000 profit plus you have 30% of home equity built up on $200,000). So the bank could say, for $150,000 you can close your mortgage.
So, you sell the house for $400,000 to a property investor, close your mortgage for $150,000, so now you have $250,000 in cash.
You pay long-term capital gains taxes of 15% (because you sold the house 10 years later), which means $40,000 goes to the IRS, so you are left with $210,000 in cash.
Then, you use $50,000 to cover your expensive credit card debt, saving you $1,000+ per month.
You buy a new house on mortgage (let's say you move out of the big city and move to suburbs 2-3x times cheaper or you move to a cheaper city or state, close to your work)
You buy a $300,000 new house on mortgage, you could get a FHA loan with 3.5% for low down payment, without paying 10-20% down, so let's say you paid 3.5% down, that leaves you with $10,500 for downpayment, so you have $210,000 - $50,000 - $10,500 = $145,000 left in cash.
And you still have $45,000 in cash. (Please if you invest into the stock markets, buy individual shares of stock or ETFs through your personal bank and not through brokerage as you can not trust brokerages)
So the result is 1) You sold your first house for $210,000 in profit (after taxation). 2) You closed your expensive credit card debt of $50,000 saving you $1,000+ per month. 3) You bought new, cheaper house on mortgage. 4) You invested $100,000 into the stock markets which becomes $1 million in 10 years from now. 5) You still have $45,000 in cash.
Or what you can do as well, by selling the house after 10 years of paying the mortgage, you have $210,000 of profit and you buy a second house with FHA loan of $300,000. So you have $210,000 in cash! It pays of to get a mortgage on a house and close your mortgage (sell the house) after 10 years! (a $300,000 house that appreciates by 5% per year, appreciates 50% in 10 years time, so you can bank $150,000 in cash plus the built-up home equity after 10 years (you close the mortgage for less price than you purchased the property for) plus the house renovation appreciation like turning a 3-bedroom house into a 4-bedroom house with the attic as bedroom! plus it's a fully furnished house you are selling)
Hire your (unemployed) friends or family to do some house renovation/redecoration before you sell it so your house feels cozy.
You can also rent-to-own or rent-to-mortgage a house whereby 5 years of rental payments are used as downpayment for the mortgage and whereby you don't need a credit score check or 10-20% downpayment. If the rent-to-own payments are not too high, it could be interesting to implement this idea whereby you sell the mortgaged house (without need for downpayment or credit score check in the first place), 10 years later for $150,000+ profit! So your rental payments are invested into the house, which you can cash out 10 years later already. As well, rental payments may be lower than outright renting a house as normal rental payments can be double mortgage payments.
That's genius!
