Other People's Money

The wealthy like to put their money to work for them rather than let it sit idle. They take
out mortgages rather than use their valuable present-day dollars to pay for their homes.

The smartest money managers buy their homes with other people’s money – lenders. Why do they do this?

When you purchase property, you have very little, if any, control on how the value of that property will change. The housing market is known for taking surprising twists and turns and any community can receive an unexpected boon or a surprising slump.

Cash used to pay for property has the risk of being lost. This is particularly important because that same cash could have been used to make other investments.

Other People’s Money, or OPM, is simply borrowed money. You can use OPM to tap into your equity and invest that money to build your wealth. Because equity in your real estate has a zero rate of return, you’re better off using the bulk of your money elsewhere.

In short, you can get a larger mortgage on your home, OPM, and use the cash you didn’t pump into your home to maximize your retirement savings or build tax-favored benefits using a private non-qualified plan.

-adapted from an article by Marian Snow, author, "Stop Sitting on Your Assets"
Her site: http://www.stopsittingonyourassets.com
Her blog: http://mariansnow.typepad.com/assets