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Business Development

What a Mortgage Really Is (and Why You Should Rethink It)

ballandchainRather than being stamped with the word “APPROVED”, what if every successful mortgage application was stamped with the warning “ENSLAVED”?

Today we take a contemplative step back from the status quo and begin to look critically at mortgage financing through the eyes of a debt-free investor.  In addition to illuminating the cold hard facts about your local banker’s favorite trap, we now begin a new series with Shaun McCloskey to identify more flexible financing alternatives.

American Dream or American Nightmare?

Although mortgages are nearly ubiquitous across the landscape of American homeownership, it doesn’t take much for this rigid version of the American Dream to turn into an American Nightmare.

Successful mortgage financing arrangements require an almost-perfect harmony of numerous variables, and it only takes one or two unforeseen developments to sufficiently disrupt a mortgage holder’s once-profitable real estate investment.

For example, consider each of the following risks and its ability to significantly impair the dutiful landlord’s monthly mortgage payments to his bank…

houseofcardsEmployment Risk – Even the most creditworthy tenants can lose their jobs and consequently fail to pay their monthly rent.

Pricing Risk – Even the least price-sensitive tenants can fail to renew their lease, leaving their landlord unable to find any suitable replacements.

Behavioral Risk – Even the most well-behaved tenants can mistakenly host a crazy out-of-town relative who trashes the entire house.

Structural Risk – Even the most highly-recommended homebuilders can overlook expensive structural weaknesses while building/renovating the property.

Environmental Risk – Even the most comprehensive insurance plans can fail to cover certain expensive environmental damages to the property.

Of course, all real estate investors must navigate these and other risks; it comes with the territory.  But investors with mortgage obligations face a particularly difficult truth: While their property’s net operating income is certain to be occasionally reduced (or nonexistent), the property’s mortgage schedule is certain to remain unchanged.  The mortgage holder is trapped between a rock and a hard place – sometimes for thirty years, or more!

There Are Flexible (and Simple) Alternatives to Mortgage Financing

signTragically, despite the unforgiving nature of mortgage financing arrangements, many real estate investors fail to adequately consider the their abundant options for more flexible financing solutions.  Nobody likes to be in debt, but woefully few investors know how to circumvent this “necessary evil”.

That’s where Real Estate Mogul comes in!

Author, investor and Lifeonaire coach Shaun McCloskey knows a thing or two about debt-free investing, having personally sworn-off debt financing entirely several years ago.  Check-out the following video and tune-in as Shaun begins to introduce his general financing philosophy.  And be sure to take notes as we begin to explore some flexible (and simple) alternatives to mortgage debt.

From Shaun McCloskey, Debt-Free Investing Veteran…

{Mogul Elite: Download a transcript and MP3 of this video in the Power Pack tools for this lesson.}


Do It To It! Immediate Action Steps
  • Be Careful – When pursuing a mortgage, be very careful to understand exactly what you are being asked to sign.
  • Consider – Consider your ability to invest alongside financial partners who will provide debt-free funding in exchange for other services (eg. property management and/or administration).
  • Tune-In – Tune-in to the rest of this series with Shaun McCloskey to learn more practical methods for debt-free investing.
  • Think Outside-the-Box – In the meantime, challenge yourself to think outside-the-box about ways to invest debt-free.

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