On the surface, this book seemed like the ideal read. It has a strong premise of how to create multiple streams of income using debt leverage. That is a great premise and one that we follow and put into practice every day. It was such a disappointment that this book failed to deliver on such promise. We really wanted to like this one, but at the end of the day, we simply cannot recommend it.
Let’s go into the good things first. Those who are new to real estate investment will get a lot of information from just the few chapters. The book covers 1031 transfers in a way that makes them so easy to understand. So many books try this and can’t even do that in 200 pages, let alone in a few chapters, so this is a definite plus for this book. They also cover some really great advice on how to actually make money with your mortgage.
The basic premise is that you take out a Smart Loan, using ARM payments. Make only the minimum amount and use the money that would have gone into higher payments into a high interest account. Sounds great on the surface, but it is obvious that the authors thought that the age of low interest rates on ARM loans was going to last forever. That’s simply not an intelligent way to think – the markets have already proved this many times over.
We fear for those that took this advice to heart and are now trying to figure out how to keep their homes. While debt leveraging is a terrific way to make money, and create more than one stream of income, it should never be done in a risky manner. It’s one thing to take out a loan, it’s another to think that interest rates are never going to skyrocket. By far, the best idea is a fixed rate loan, even if it means you’ll be making a little less money. You’ll more than make it up compared with what would happen when your ARM rate explodes.
We would have liked to have seen more than one option mentioned in the book, and it would have made it easier to offer at least faint praise. However, by only providing readers with one option, the authors failed to provide smart advice on smart loans. They always fall back on relying on that ARM to stay low, and this is a mistake that only amateurs make.
While this book is definitely not advice anyone should follow, debt leverage is still one of the best ways to make extra money. However, the key is finding the SMART way to do it an minimizing your risks. There’s no point in going to all of that trouble if one change in the market could drastically affect your fortunes. The book had a lot of promise, but at the end of the day, it simply failed.
Originally posted 2008-08-22 05:06:52. Republished by Blog Post Promoter
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Book Review, Debt, Income Streams, Leverage, Money, Personal Finance
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2 comments ↓
So let me get this straight. You take out a huge house loan at, say, the current rate of 6 percent, and “invest” the money in “high interest” accounts. If that was possible, no bank in its right corporate mind would loan you mortgage money because that money could be “loaned out to high interest accounts” (whever those are? Anybody seen an financial instrument that will completely guarantee you will get a better interest rate than your mortgage? Ok…..I’m waiting…..LOL! Of course, you can take your loan and “invest” it in the stock market, which has been flat as a pancake for the past 10 years. It may go up eventually but, somebody has to keep paying the mortgage. Unless your rich uncle is footing the mortgage bill, you aren’t making money. Best bet is to get rid of the mortgage ASAP. Nobody I know of is offering a guaranteed 6 percent return and that is what paying off your mortgage will get you today.
Hmm. I guess this is one of those “not for everyone” options. It’s highly risky, and I think only those who know exactly what they’re doing should be able to do it. I think people would most likely end up losing money than earning if they don’t pay their mortgages and such.
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