Why Millionaires Never Pay Cash for Real Estate
Historically speaking, Real Estate has a slower growth rate than the stock market.
Over the past 40 years, Real Estate has grown about 4% per year while the stock market has grown at about 11% per year.
So if you pay $1,000,000 for a piece of Real Estate, your growth would be around $40,000 1st yr, $41,600 2nd yr, and so on...
If you invest $1,000,000 in stocks, your growth would be $110,000 1st yr, $122,100 2nd yr, and so on...
So, if you take a $1M loan with a 6% rate, you pay about $60K in interest.
Then, you take your $1M and invest in stocks and make $110K per year.
You are net positive $50K per year.
Once rates are down to 4%, you refinance your loan and pay $40K interest per year. You are still making $110K+ per year in stocks, which means that now you are net positive $70K+ per year.
P.S. These are rough numbers, and I am not calculating compounded returns which could increase your returns.
Oh yeah! My favorite food is kabob! :D