I would like to share a small method. This year, my wife and I borrowed money from the banks using our real estate properties, via line of credit and cash-out refi. We invested the cash in an SP 500 index fund. It is all lenders’ money, not our own money. This is using other people’s money.
Our SP 500 account is currently up with a profit of about $240,000.
The expenses included interest payments to the banks and closing costs for refi, which total less than $40,000.
So, the net profit in this SP 500 account in 2020 so far is more than $200,000.
The SP 500 will go up and down. It may decline tomorrow. But in the long term, it returns about 10% annually.
The $200,000 in our SP 500 account is a small profit, compared to the big successful investors on Wenxuecity. A few of them do very well, and I respect them.
But this small method is simple and suitable for the ordinary people. The total time that I have spent on this is less than 6 hours, including emailing documents to the bank, the time to do closing for the refi, and doing some clicks on my computer to buy an SP 500 index fund.
I think that spending 6 hours and making $200,000 is not bad for the ordinary people.
Furthermore, this 6 hours are a one-time event. If in the next ten years the profit in this SP 500 account grows to $1 million, the total time that I spend is still 6 hours.
Hope this small example will inspire the ordinary people with houses and rental properties to use line of credit or cash-out refi to use the lender’s money to grow more wealth, passively, by spending only a few hours of time. In the long-term, the SP 500 should grow much faster than the super low interest rate right now.
By David Meng, author of the book “$5 Million in 8 Years: Real Estate Investing on the Side.”
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