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Posted over 11 years ago

How to (Legally) Make Someone Else Pay the Mortgage

With most tasks we’re confronted with in life, there’s a right way to do it and a wrong way; or at least a better, smarter, more profitable way. Real estate investing is no different. While it’s certainly no crime to buy a piece of property with all cash and wait for it to appreciate - which it probably will at a rate of about 6 percent annually if historical returns continue to hold - why handcuff yourself with such paltry returns? Done that way, you’re barely scratching the surface of the profit potential of property as an asset.


If your standards for return on investment are that low, you might as well go back to Wall Street and take your chances with the modern financial mafia. Jason Hartman would like to submit the following real estate strategy for your consideration. Try it. You might like it, especially if you start seeing 30 percent annual returns like some people have.


Forget Cash


The first point to understand is that, in real estate, cash kills profits. The more of your own cash you put into the deal, the worse it is for you. Why? In a word - inflation. The only way to consistently profit in the face of this currency killer is to hold your value in something not based in traditional money. When currency is weak, something else must be strong. What is it? What’s the opposite of currency? Debt! Not just any debt, mind you, but a long-term, fixed-rate mortgage tied to a piece of income producing property


Your lender will probably make you put some level of cash into the deal as a down payment but less is better. Use as much of the bank’s money as possible and never plan on paying it off. Jason suggests a periodic round of refinancing instead.    


Don’t Pay Your Mortgage

No, we’re not suggesting you embark upon a route of non-bill paying that leads to foreclosure. What we are suggesting is that, instead of raw land, buy a lot with a single-family residential house on it and rent it out. With a properly structured deal, the monthly income you receive from your tenant should cover your mortgage, maintenance expenses, and leave a positive cash flow as profit. Keep it rented for the life of the mortgage and you have just accomplished an amazing trifecta:


  1. 1. You own an asset free and clear

  2. 2. Someone else (the bank) loaned you the money to buy it

  3. 3. Someone else (tenant) made the monthly mortgage payment


We triple dog dare you to find a better investment strategy than that. Got one? Let us know about it. (Top image: Flickr | gcfairch)


The JasonHartman.com Team

“The Complete Solution for Real Estate Investors”



Comments (2)

  1. Shanequa - Thanks for the comment/question. My very next post will address that issue. Thanks!


  2. Why would you want to keep refinancing a mortgage and paying fees if you have good cash flow and a low interest rate? Eventually, I would want my financed properties to be paid off.