Would You Sign A Death Pledge?
Did you know that the Latin word ‘Mortgage’ literally translates to mean ‘Death-Pledge’ in English? That’s right, ‘mort’ means ‘death’, and ‘gage’ means pledge. There you have it, if you have signed a Home Mortgage, you have signed a Death-Pledge to a bank. And if you think about it, it’s a fairly daft reality that plagues most folks with a Home Mortgage, because the bank wants you to be enslaved to them for the next 25 to 30 years. You have agreed to a vampiric energy transfer that keeps you in the rat race and sucks up about 40% of your surplus productivity (Household Income) each year. You might be thinking the odds are stacked against you when all you want to do is get ahead and you are 100% correct. The golden rule is ‘he who has the gold, makes the rules’ and that concept is alive and well in our modern corporatized world.
To add insult to injury, banks use fractional reserve accounting which means that the money that you borrowed from them didn’t exist before you signed your Death-Pledge. The bank created the money out of thin air by keying numbers into a computer terminal. For any contract to be valid, it requires satisfactory ‘consideration’ which in legal terms, means to give something of value for something of value. If the money that you borrowed didn’t exist before you signed the Death-Pledge, did the bank really give you any real consideration? Many have attempted to argue this point in court and have failed miserably and had the banks sell their homes from underneath them. Make no mistake, the entire system is rigged against you if you challenge a better-resourced opponent in court like a bank. It’s not worth the fight to take on a bank, but fortunately, there are some Strategies available that we will get to in just a bit.
So, what is your plan? Do you have a plan to exit the rat race early or do you plan to work really hard for the next 25 to 30 years giving away your surplus energy to a bank? Have you ever considered if there is a smarter way?
The good news is that there is a smarter way, and it is all about making a few good decisions about debt at the right times in your life. However, if you do nothing then nothing will ever change, and you will be destined to keep treading water in the rat race until you grow old and die. If that happens, then it’s game over the banks win, again.
So, let’s look at some of the Strategies that our investor clients use to beat the banks at their own game.
Strategy 1 – Rentvesting
This is such a great strategy to use to get into the property market early. It helps those just getting started and on a limited budget. The idea is to use the income generated from a Property Solution’s rent to pay a massive chunk of the monthly mortgage payments. Banks will usually allow up to 40% of household income to service a Home Mortgage, however, they will allow up to 80% of rental income for an investment property. This means that rental income is about twice as strong as ordinary income. The beautiful part about this strategy is not just the tax benefits, but also that our clients get to rent in their most desired location near friends, family, and most importantly near their job. This is key for young investors breaking into the market for the first time. If our clients choose the right property in the right location, then they will build equity over the long term which will give them more opportunities down the road.
Strategy 2 – Mortgage Elimination
Many of our investor clients have built up equity in their homes but still have Death-Pledge on their homes and a noose around their necks. Our most successful clients have learned to borrow against their lazy equity and get it working for them. This then covers the equity needed to acquire a new Property Solution. They then borrow the other 80% or so from another bank. The plan is to acquire a Property Solution that has strong income that will generate positive cash flow and then once the property has grown in enough value to sell the property, pay the CGT and then pay off a huge chunk of their Death-Pledge in one foul swoop. This shaves decades off their Death-Pledge timeframe. Once this is done, our clients can then borrow against the more available equity and repeat the process. Often times it’s at this point, our clients can acquire two or three positive cash properties at once and really turbocharge their property portfolio.
Strategy 3 – Retirement Income
We regularly see our investor clients that have done all the right things and paid off most of their Death-Pledge through pure grit and determination. They are screwed because their biggest asset is their home and they have not generated anything that will pay them income in retirement. They are usually in their 50s and know that retirement is thundering down the line towards them, and a government pension won’t provide for them during their twilight years. They know that if they don’t do something, they will be eating baked beans in retirement because they can’t eat their wallpaper. These clients need to make a key decision around taking on more debt because once they hit 55 the banks make it a lot harder to borrow. Our NDIS Property Solutions really help these clients generate passive income where the surplus income is well above the monthly interest payments.
Conclusion
We live in a world fuelled by debt, where money is debt and debt is money. Our paper notes are literally nothing more than promises to pay and are backed by nothing. Banks create money out of thin air, and we transmit our energy to the banks via our monthly Death-Pledge payments. It’s not fair but it’s the world we live in. You have a choice, you can either roll over and take it every year until you retire and pay off your mortgage. Or you can start making smart decisions about debt. Yes, it can be daunting and that is why it is best to work with a professional team that can guide you every step of the way.
If you want to learn more about our approach to property investing, then please reach out to the team by clicking on the button below.