Reply to How Rich is Rich?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]You live in a 2 million dollar house and are asking this?  Yes you are rich.[/quote]

[b]You can't leverage it unless you take a HELOC[/b] and invest the money so well you get positive cash flow after making loan payments, e.g. beat interest rate well enough. A house you live in is not an income property.  In HCOLA your housing will be $$$ if you don't want to live in a complete dump, hers isn't extravagant anything for the area.  Can she downsize and live in a 2 bedr condo? Yes, but not until kids are on their own.  Again, it's a nest egg that cannot be cashed out just like 401K until some time in the future without huge penalty. [/quote]

That's actually all you need to leverage it (Getting a heloc).

And I don't know why you're talking about investing the funds from heloc to get a return above interest. Are you forgetting that your house is an appreciating asset?[/quote]

If you want to keep your house you have to pay your HELOC back. You will be making payments and paying more than what you borrowed back because of interest. It's basically like having a mortgage again even if your house is paid off. You will need to make this money you borrow grow and return income to cover the cost of your loan payment.  Each month you have to invest this money to produce the return greater than the loan payment, so that you can feel like you are having this extra cash flow you are lacking.   When you don't produce the return you have to dig into your loan principal, e.g. eroding it and paying back what you borrowed instead of it working for you.  Your house appreciation isn't a guarantee.[/quote]

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