Building Wealth: 10 Strategies for Successfully Managing Equity

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Back in 1989, I purchased my first buy and hold investment property, a nice duplex that now has some large commercial garages, which I built later on, at the back of the property.  At this time in my life, I was 29 years old, and my goal was to buy one property a year for the next 20 years, and then I wanted to pay them all off, all 20 of them.  I contemplated my goal for future retirement as perhaps selling one property a year for 20 years, while holding paper on each property as I sold it. My idea was that I would then live off of the cash flow of mortgage interest received, and at the same time, get out of the property management and repair business in my old age.

As time went on, and I became more educated and experienced, my viewpoint on this did a complete 360.  I remember asking my accountant if this strategy of paying down rental properties made any sense, and he pointed out that it was pretty much irrelevant, as long as I cash flowed.  He said you could write off mortgage interest for as long as you are paying it, and as long as the government didn’t come along and change the tax code.  The only thing that would go away would be the depreciation over time. But he said, I could always do a 1031 Exchange into something bigger and better (e.g. Apartments or commercial properties) to pick up my depreciation again. After all, the game plan was to “defer, defer, defer, die,” when it came to taxes.

Then years later, when I began to not only sell real estate, but also insurance and financial planning, I began to study many more wealth building techniques.  Many of these seem controversial at first (especially on BiggerPockets), but I think we should all have an open mind when contemplating any new or creative wealth building strategies.  After all, it wasn’t long ago that we earthlings thought that the world was flat.

So, here are 10 Equity Management Strategies expressed by one of my favorite, unbiased, financial planners, Doug Andrews, author of “Missed Fortune 101.”  He lists these strategies by identifying the common myth and then explaining the reality associated with each (all 10 are listed on page 251 to page 254).

10 Strategies for Equity Management

#1. Avoid the $25,000 mistake that ensnares millions of Americans.

Myth:  The best way to pay off a home early is to pay extra principal on your mortgages.

Reality:  No method of applying extra principal payments to your mortgages is the wisest or most cost-effective way of paying off your house.

Strategy:  Establish a liquid side fund to accumulate the funds required to pay off your mortgage, maintain flexibility, achieve substantial tax savings, and accumulate excess cash.

#2. Avoid expensive risks.

Position yourself to act, instead of reacting to market conditions that you have no control over.

Myth:  Home equity is liquid.

Reality:  When you need it most, you may not have it.  Home-equity is usually non-liquid.

Strategy:  Separate as much equity from your property as is feasible, positioning it in financial instruments that will maintain liquidity in the event of emergencies and conservative investment opportunities.

Related: Equity Stripping: Recycling Your Cash to Maximize Capital

#3.  Separate home and equity to increase safety.

Real properties with high equity and low mortgages get foreclosed on the soonest.

Myth:  Home-equity is a safe investment.

Reality:  A home mortgaged to the hilt or totally free and clear provides the greatest safety for the homeowner.

Strategy:  Separate as much equity from your home as feasible to achieve greater safety of principal and reduce the risk of foreclosure.

#4. The return on equity is always zero-no matter where your property is located.

Myth:  Home equity has a rate of return.

Reality:  Equity grows as a function of real estate appreciation and a mortgage reduction; however, equity has no rate of return.

Strategy:  Separate as much equity from your home as feasible in order to allow idle dollars to earn a rate of return.

#5.  Make Uncle Sam your best partner.

Mortgage interest is your friend, not your foe.

Myth:  Mortgage interest is an expense that should be eliminated as soon as possible.

Reality:  Eliminating mortgage interest expense through traditional methods eliminates one of your best partners in accumulating wealth and financial security.

Strategy:  Use the difference between preferred and non-preferred interest expense to make interest work for you instead of against you.

#6.  Use debt for positive leverage.

Myth:  Any and all debt is undesirable.

Reality:  Some debt, when managed wisely, can be desirable.

Strategy:  Use debt wisely as a positive lever for equity management purposes, conserving and compounding equity rather than consuming it.

Related: Another Way to Use Real Estate Debt Wisely

#7.  Understand the cost of not borrowing—compare deductible versus non-deductible costs.

Myth:  Lower mortgages, resulting in lower payments, mean lower costs.

Reality:  If you take opportunity costs into consideration, low mortgage -to- home- value ratios create tremendous hidden costs that increase the time needed to pay off a mortgage.

Strategy:  Choose to incur deductible employment costs rather than non-deductible opportunity costs, since you have no choice but to incur one or the other.

#8. Turbo charge your wealth growth rate by creating homemade wealth.

Myth:  Borrowing funds at a particular interest rate, then investing them at the same or lower interest rate, holds no potential growth returns.

Reality:  You can earn a tremendous profit-regardless of the relative interest rates-by positioning your money in a tax- favored, interest- compounding investment earns a return greater than the real net cost of obtaining that money.

Strategy:  Learn to apply the fundamental principle that highly profitable financial institutions use to accumulate and create wealth-arbitrage.  Employ equity to earn a rate of return higher than the net cost of separating that equity.  By doing so, you will create tremendous wealth and substantially enhance your net worth.

#9.  Strategically refinance your home as often as feasible to increase your net worth and put those idle dollars to work.

Myth:  Equity in your home enhances your net worth.

Reality:  Equity in your home does not enhance your net worth at all.  Separated from your home, however, it has the ability to dramatically enhance your net worth over time.

Strategy:  Set the stage to substantially increase your net worth.  Refinance your home as often as feasible separate equity and accelerate the process of accumulating the resources to cover all your debts.

#10.  Keep your mortgage balance high to sell your home more quickly and for a higher price.

Myth:  The amount of equity you have in your home has no bearing on how marketable it is.

Reality:  Your home may likely sell much more quickly and for a higher price if it has a high mortgage balance (low equity), rather than a low mortgage or no mortgage balance (high equity), especially in soft real estate markets.

Strategy:  Always maintain as high a mortgage (with flexibility) on your home as feasible to keep it marketable at the highest possible price should you want to sell the property.

When I first discovered financial planning concepts like these I was very skeptical. Could these all be true?  Well, to be quite honest, I have tried out many of these concepts over the years, and they do, in fact, work. They’re the primary reason I’ve successfully accumulated all the wealth that I have.  The idea of utilizing equity in a new, tax-saving, and asset protected way is novel to many to say the least.  But, it really comes down to being debt free on your balance sheet. For example, the money can be placed in a conservative investment vehicle, such as an IRA/Retirement Account, insurance policy (no variable rate), or an annuity—see my recent article, “Who’s Your Financial Advisor?” This is true financial freedom, without the lost opportunity cost.

Although my early real estate investing career may have seemed archaic by today’s financial planning strategies, at least I had a plan. I do believe that having a plan, regardless of how advanced, is always the smarter choice than not having one.  As John L. Beckley (author, businessman, and founder of Economics Press Inc.) wrote, “most people don’t plan to fail, they fail to plan.”

I’m truly blessed that I was persistent in my quest for knowledge and lucky in my choice of occupations, so as to mature my own financial plan into a significantly better investment plan for the millions of dollars in equity that I have accumulated over the last 25 years.

So, tell me, what’s your favorite plan to get the most out of your equity?  What’s your favorite strategy to get that equity RISK off the table and into something safer?

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About Author

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

50 Comments

  1. Good article. I agree generally with most of what you say except #4 – the ROE of paying off any debt is the interest rate (adjusted for tax savings if necessary) of the loan. In that way, paying off a mortgage does provide a rate of return – the interest you’re NOT paying.

    Also, I wonder about #10 – how many agents say “let’s look at this house, because the mortgage balance is lower”?

    • Yes- please explain how having your home financed to the high side improves the odds of a sale and the sale price. I’m not clear on what you mean by this. Thanks.

      • My interpretation is it doesn’t have to do with how many agents will show your house, but during the negotiation phase, buyers are going to be less like to beat you up on price if they know you have less equity, since they understand you have a mortgage to pay off and will need to net a certain amount. At least that’s what I think the point is. I’m sure Dave will weigh in.

    • Dave Van Horn

      Hi Adrian, thank you for you comment!
      In paying off the mortgage, you are paying off the expense. Meanwhile, you’re losing a tax-deduction, as well as an actual rate of return that can be made somewhere else (lost opportunity cost). You’re just protected the bank in that case (until paid off in full) and taking on more exposure and risk (e.g. property values declining, judgments, etc.). For example, with Hurricane Katrina, homeowners were waiting years for insurance companies to pay up on claims. But, if they had their house mortgaged up, with their cash in a safer vehicle, they would’ve fared much better.
      With regards to your question about #10, as an agent for RE investors and an investor myself, I can say we almost always did. We also looked for sellers with no mortgage, and we would normally present at least 3 offers on every deal: one that was cash, one that involved owner financing of some sort, and one with traditional bank financing.
      Best,
      Dave

  2. Nice article.

    In January I started analyzing my properties and selling a couple of them based on the amount of equity vs. cashflow. I divided my yearly cashflow by the amount of equity in each property and put a plan in place to sell the properties that were not providing a good return on equity.

    Frank

    • Dave Van Horn

      Hi Frank, thanks for the positive feedback!
      It sounds like you’re on the right track as far as reviewing your portfolio to determine which properties cash flow enough to keep. I can definitely relate, but if it makes sense to hold the property otherwise, there a few strategies to increase your cash flow and keep your tax write-offs.
      Once I bought a high end rehab, but when I finished fixing it up, the bank would only refinance me for what I paid + repairs (not based on the true market value). I wasn’t cash-flowing very well on the property (around $250/month). But, I still had 100K in equity. So, I waited a couple of months, and then I took a HELOC (interest rate 4%) for 80K, and I lent that out to fellow rehabbers at 15%. So, this increased my overall cash flow each month by $733.
      I hope this info helps!
      Best,
      Dave

    • I think he’s talking about how tax-advantage accounts can make up for the arbitrage difference in rates. I.E., don’t think that only that one factor comes into play when there can be multiple factors that together make more impact than a single factor.

      • Don’t you have to pay taxes on 3% ROI? Say you’re in 25% bracket and borrowed $100K @5% and invested @3%. Your interest paid is $5000 and your interest received is $3000 but you’re still out of $2000. It is tax deductible and reduces your taxes by $500 but you still lost $1500 to interest. Still negative return.
        If you can get over 5% then, yes, it makes sense but it won’t be a guaranteed return (no CDs or government bonds pay over 5% these days). Yet mortgage interest that you don’t have to pay because you have no mortgage it guaranteed savings.

        • Dave Van Horn

          Mike,
          You are correct that it’s definitely better to place the money in a vehicle with a higher return than what you borrowed the money out at. But, sometimes it still does make sense if it’s placed in a tax-free or tax-deferred vehicle, especially with the additional safety and liquidity, as you could take the downward market risk off of the table. The lower the tax bracket the less effective this strategy can be. This is a classic example of why financial planning strategies really aren’t one-size-fits-all.
          Best,
          Dave

  3. Sara Cunningham on

    Dave thanks for writing this article. Although I agree with most of your points I am also confused at the same time. Sure it makes sense to take cash and invest it instead of making extra principal payments and lowering the loan balance. For one you will lose the mortgage interest benefit when paying taxes. However you suggest investing the extra cash somewhere else. I agree with Mike if you are paying 5 or 6% interest rates where are you going to get a better rate of return to make it worthwhile? Also you mention using an IRA and putting the extra money into that. Surely this isn’t liquid either since there are penalties attached to withdrawing money from these types of accounts? Also you are taking a risk if you don’t know what funds to choose when the markets drop you stand to lose money not just gain it. Over the years I have lost plenty of money in the mutual fund/stocks arena, all this with working with a financial advisor too. You also mention refinancing as much as possible and taking equity out to help accumulate wealth, but this also has a lot of upfront costs that can take years to recoup. Could you please clarify for my simple mind how to make this worthwhile. I would do all the things you suggest if I thought I could get a good rate of return investing that equity somewhere else.

    • Sara, just thought I’d answer a couple of your questions, altho I’d love to hear from Dave also what #8 was referring to, but:

      “Where are you going to get a better rate of return to make it worthwhile?” I’m sure Dave would say via note investing, which is his specialty (http://www.pprnoteacademy.com/).

      “Also you mention using an IRA and putting the extra money into that. Surely this isn’t liquid either since there are penalties attached to withdrawing money from these types of accounts?”

      If the funds are in a Self-Directed IRA, they can be used for investing purposes, penalty free.

      • Sara Cunningham on

        Thanks for clarifying Sharon. I’ve just started reading about self directed IRAs I need to look into them further as I’m currently looking at rolling over an old 401k I have. We live overseas like you and you can’t get any advice or help here since agents in the US aren’t allowed to give us advice since we don’t live there right now, or so they tell me.

        • Really? Where do you live? I tried finding you on BP but no luck. Send me a colleague request some time – would love to get to know you better! Take care. Sharon

        • Dave Van Horn

          Sara, if you are unable to find good information online, a few good books on the topic are “Parlay your IRA into a Family Fortune,” by Ed Slott, “Missed Fortune 101,” by Doug Andrews, or “Banker’s Code,” by George Antone.
          I hope this helps!
          Dave

    • Dave Van Horn

      Hi Sara, thanks for your comment!
      Many places, Self-Directed IRAs enable you to invest in many things along with regular money too, such as Private money, notes, RE, Lending Club, Annuities, RE Funds, Insurance contracts, businesses, and equipment leases, etc
      Some are liquid, like contributions to IRA’s. Annuities are liquid too (but have early withdrawal penalties that only reduce interest). Most of these vehicles are protected against lawsuits, judgments, and bankruptcy as well.
      I’m usually not talking about investing in the market, although some insurance contracts may be tied to an index or have a min. return. Also, I’m usually not re-mortgaging in the traditional sense; it’s more likely that I’m utilizing a HELOC (Home Equity Line of Credit, which is very inexpensive).
      Best,
      Dave

  4. I have a friend that practiced many of these strategies before the housing bubble burst in the mid 2000s. On paper he was worth several million and owned over 100 SFHs. Once the rents dropped he was losing on nearly all these properties and he couldn’t sell these for what he owed. He filed for bankruptcy and lost everything. If he just owned 10 of these properties free and clear he would have been in much better shape. I understand that to become very wealthy it’s important to not tie up capital in equity. But for me I’d prefer to have little to no debt and would like to work toward paying off all debt.

    • Hi Paul,

      I think the point you raise here is extremely important. When the down-turn comes (as it always does), you’ve got to be in a position to tighten your belt and live with less gross income until you can turn things around. If you’ve levered up as much as possible, you have the highest possible fixed debt service cost and have significantly increased the risk of default and/or bankruptcy as you mention.

      I also wouldn’t advocate having all your assets free and clear either, for the reasons Dave brings up. Whats the right amount of debt to equity across your portfolio? Can’t say that I know that number for myself, and it will be different for everyone, but the point is that you’ve got to have a balanced strategy when it comes to maximizing return and managing risk.

      Dave – I’d like to get your thoughts on this as well if you see the comment.

      Thanks,
      Matt

      • Dave Van Horn

        Hi Matt,
        The best thing you can do in a downturn is make sure you have reserves and make sure that you’re your properties still cash-flow. It’s only really an issue if rents fall enough that you are no longer cash-flowing, and this is probably more prevalent in a geographically speculative real estate market.
        It isn’t only the properties that can cash-flow. So can the investments that you place the separated equity dollars into. With the money placed in a safe, liquid investment vehicle, that makes a higher return than what you borrowed at, you will have more cash-flow, more reserves, and less risk. In this type of vehicle, the money would be accessible in the event that it’s needed. For me, the debt to equity across my portfolio is as high as traditional financing allows.
        I hope some of this info helps!
        Best,
        Dave

    • Paul,

      I think you bring up a great point, but I don’t think this article is saying to do that. See tip #1, he says rather than pay extra to your mortgage, put those extra payments into a more liquid asset class, or keep them in cash.

      I think you also have to figure out what you could afford when a downturn does happen and rents are slashed, and what the max leverage could be carried during this time. This will allow you to deploy the maximum amount of your resources and still be hedged against the downside.

    • Dave Van Horn

      Hi Paul,
      This exemplifies my point and I do agree with Ben Duq’s comment below.
      It’s about increasing your net worth, not increasing your equity. Often, these two are confused. Equity fails the liquidity, safety, and rate of return test. But, if separated and placed in a safe, liquid vehicle that has a rate of return higher than what you borrowed it out at (true arbitrage), you can keep your mortgage interest deduction while building wealth.
      Best,
      Dave

      • I agree that getting a safe, liquid vehicle that has a higher rate of return than what you borrow is a great idea. If found, this will undoubtedly lead to greater wealth . The challenge for me is finding the “safe, liquid vehicle” that will consistently have a higher rate of return than the money I borrow.

  5. Life stage is important too.
    A mortgage-free home is an asset that can’t be touched if Medicare is needed to provide care in a SNF. Just remember to keep telling everyone that you INTEND to return home eventually, no matter how unlikely or unreasonable it may be – that “intent” preserves the home as an “exempt” asset, which can be transferred to heirs pre-death.
    Investment funds can.

    • Dave Van Horn

      Hi Deana, you’re making a great point here. Nursing home care, retirement, and legacy planning are a whole other issue and article, or articles. Many things are very state specific in regards to the transfer of assets pre-Medicare, especially with things like look back periods. This is why it’s very important to control assets but not to necessarily own them.
      Thank you for your comment!
      Best,
      Dave

  6. Dennis Tierney on

    I used the HELOC strategy to help purchase an apartment at the end of 2012. We paid 4.5% interest only and the investment returned 10% cash on cash for the equity invested. I considered it just shifting equity from the home to a cash flow generating investment. The loan is now paid off and we’re ready to repeat the process. This time I’m considering investing in a series 34 oil/gas driller with great track record. It’ll allow 94% tax write off up front and tax advangtaged cash flow from monthly dividends. It’s more risk than the apartment but will allow more diversification of income streams.

  7. DAVE
    Your story is so similar to mine as I look back- I started at 24 with my first property with idea of buying & paying off 30. Since tenants really pay them off for Investors- I decided to buy a few more than that and I did. I plowed the payments all towards a rapid payoff except for a few small cash perks for myself along the way. Well this has happened about 3 times now over the past 37 years as a RE Investor. Looking back I would say that was not the best thing to do and agree with your analysis in that Equity has not kept up with Other more profitable investments- fix and flips or equities. Almost anything that would have given near 10% returns would have been better to have invested those positive cash flows into.
    My primary career was in the Insurance and Financial Planning- mostly retirement planning business as I studied in college with minor in Real Estate. Looking back today I would not pay those off so fast as you refer to but invest the cash differences of net rents. All my properties were bought with borrowed money from Financial Institutions that I pledged my two large Life Insurance policies- one a fixed interest policy and one a variable stock market policy that I wrote for myself. The leverage or arbritrage of using them to negotiate a lower prime interest rate in a Equity Line I could write off, guranteeing the banks their money whle growing in values steadily at 6 to 8% tax sheltered rates of return while in my eyes buying my Real Estate on a “Cash Is King” that is lower cost always, never paying $3,000 to $10,000 in closing costs to obtain the properties was key to building my wealth. Plan to write a full article similar to yours above with more detail.
    But my point is, rapidly paying down those credit balances to rid the debt, instead of investing those cash flows, was NOT the best financial move imo now looking back, even though Debt Free provides a certain peace of mind many of us seek and frankly over value.
    Mainly cause the equity buildup has been much less that I anticipated- except for the home I live in great schools, and neighborhood. It has done well to triple in value in 20 years but the rentals have not- taken 35 years to just double. But when someone buys that asset for you such as Tenants like to do, giving you Extreme Tax Advantages against Earned Income if you have EI, which I recommend is one of RE’s greatest value….
    You make some good points- more later.. JE

    • Dave Van Horn

      Jack,
      I couldn’t agree more. Besides, properties will appreciate (or depreciate) in value regardless of whether you pay them down or not. Thanks for sharing! You’re right—our stories do sound pretty similar.
      Best,
      Dave

  8. If you are looking at refinancing an investment property, do you take out as much equity as possible or just enough so that the property can break-even?

    I have a property with some equity I could tap but doing so would raise my mortgage cost to more than the property brings in with rent. I am concerned if I take out too much equity then I will create a situation where my investment property requires constant capital injections just to keep it afloat.

    • Dave Van Horn

      Hi Phil,
      I do, usually because I am typically investing the equity into something that cash-flows at a higher rate of return than what I borrowed out at.
      I hope this helps! Let me know if you have any additional questions.
      Dave

    • Dave Van Horn

      Hi Deanna,
      Yes and no, I also tap the equity anytime a bank will give me a HELOC (Home Equity Line of Credit) because I like the liquidity and the utilization of asset protection through debt. No one says you have to access the line until you need it, but it shows for the full amount at the county courthouse even if I have a $0 balance. Also, if I become ill and my HELOC is in place I don’t have to run the risk of not getting to my equity since I’m not able to work due to illness.
      Best,
      Dave

  9. Dave thanks for taking the time to write this article and some of your strategies seem ok, but by and large I think most of them are pretty bad. That being said your method might make high returns but is among the riskiest of investment strategies. I would only recommend it to those I would want to fail. You might get away with this strategy for a few years but if you did not pull back and pay down debt you would eventually crash and burn. This type of mindset sent thousands into bankruptcy only 6 or 8 years ago. Either way good luck to you.

    • Dave Van Horn

      Hi Jerry,
      I respect your opinion, and I do agree that these advanced financial planning strategies many not work for everyone. It does take a certain level of education and discipline to utilize these strategies successfully. These strategies are from Doug Andrews (advanced financial and estate planner, author of “Missed Fortune 101,” etc.). I have, however, utilized many of these strategies for the last 26 years, and successfully managing my equity has certainly been one of the biggest factors in my success.
      Best,
      Dave

  10. I tend to agree with most of your comments. I do think some of them would be better suited for more stable geographic areas. For example here in the Midwest the market tends to stay fairly stable or goes up and down by less than 10% yearly. Cash flow on rentals would be pretty safe and would take a major economic downturn to diminish a 100-200 cash flow. If we had that kind of downturn I think any investment you made would be in jeopardy. I don’t think I would be recommending some of these tips to markets in say California. I strongly urge to keep a reserve on all properties to keep afloat during that down time. All in all I agree without a calculated risk you are limiting you future potential greatly.

  11. Hi Dave,

    Great article. Very timely for me as I am currently looking to put some equity to work. I have already ordered the book you referenced. I don’t mean to sound morbid, but what happens when you pass away and leave behind the mortgage debt? Is the next of kin on the hook for it? I supposed it would not be a big deal if the properties are cash flowing to a certain degree, and I suppose they could always liquidate and sell all of the properties as well. Any insight or knowledge you can provide on this would be much appreciated. Thanks.

    Al

    • Dave Van Horn

      Hi Al,
      Rarely are you able to mortgage a property 100%. So, yes, even if I died tomorrow, my heirs could liquidate the properties and still make money off of them.
      Also, one of the biggest financial planning tools is the life-insurance piece. In this article, I discuss getting money off of the table into a safe, liquid vehicle. Some life-insurance policies can serve as that type of vehicle and they can also buy your heirs more time and options. For example, who wants to force their heirs to sell off their real estate holdings in a down market just to settle an estate? Personally, I use 4 different types of policies. I use an annuity as one of my retirement vehicles (e.g. if you have a fixed annuity in an IRA account, you can have tax-free income for as long as you live). I use key-man life insurance, so my business partners can buy out my heirs if I die. I use permanent insurance for building cash value within a policy to act as a family bank. And, I also use term policies to build up additional death benefit.
      At the end of the day, I prefer having my RE heavily mortgaged with the tax advantages that go with it and having my money off the table in a safe vehicle.
      Thanks for your comment!
      Best,
      Dave

  12. The mortgage is attached to the property. When you die your heirs inherit 143 Pleasant street AND the $100k debt (mortgage) against it. Pretty much the same concept follows everything with inheritance – the estate is the sum of the debts and assets.
    Do some estate planning to avoid probate and make it (MUCH) easier for them – you don’t want everything held in probate for a year, or for the state to help itself to 10% for “estate management” fees (California!). Get competent advice to prevent unforeseen problems.

  13. Dave and Deanna,

    Thank you for the very insightful replies. I’m going to be setting up a HELOC soon. Any advice on what to look for Dave? Ideally, I’d like to use the funds to acquire another rental, or to put into some sort of liquid investment. The equity isn’t doing me any good sitting on the shelf!

    Al

  14. Dave,
    Let me suggest a way folks can use your method of maximum leverage and also have a safe haven if they are married. In my case I am much more risk oriented than my wife. She wants zero loans, I want that also, but I want money to invest with and I don’t have large amounts of cash sitting around.
    Our house is owned as tenants by the entireties, a method only allowed for married couples. No creditor can attach the house or any property so owned for the debts of only 1 spouse unless it was a necessary living expense. Example I buy a car in only my name with a mortgage and do not make payments, bank repossess and gets judgment. they cannot use the judgement against tenants by the entirety property. My house, my office and my shop are owned as tenants by the entireties with my wife, but most of my investment properties are owned by a company that only I am the stockholder in. I must guaranty all loans and much of the real estate is highly leveraged. If things go wrong and many judgements are done against me then our house, office and shop can never be touched.
    If however I have a hospital bill, since that is a necessary care expense, they can come after both of us since spouses are liable to help care their spouse.
    While using this approach does reduce the money available to invest, it can provide a safety net and greatly increase the peace of mind of the other spouse if they are not a risk taker.

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