“We’re not lost. We’re locationally challenged.” – John M. Ford
When it comes to real estate, the phrase, “location, location, location” always used to describe the importance of where your house was physically located. But we teach that the new “location, location, location” needs to be applied to your cash and cash flow.
With that in mind, how do you compare the investment in your house to other investments, such as your 401(k), a savings account, stocks or bonds, or even cash in your sock drawer?
Here are six crucial tests to use whenever you are deciding where to put your money:
1. Safety (how safe will my money be? What is the chance of losing my investment?)
2. Liquidity (how readily available will my money be and how quickly can I get to it if needed?
3. Rate of Return (how much interest will I earn by investing here?)
4. Taxes (do I get some tax savings or benefit from this investment?)
5. Leverage (how can I invest a small amount of money to control a larger asset?)
6. Diversification (don’t keep all of my eggs in one basket!)
Whether you are meeting with a skilled financial planner to invest for your future, or preparing to make a down payment on a new house, or paying extra on your consumer debt, these six terms should be understood and applied when it comes to finding the best “location, location, location” of your hard-earned money!
And for most homeowners in America, more of your money will flow through your house than will flow through any other investments. This means how you manage the location of your money when it comes to your house (i.e. down payment, extra principle reductions, home equity, amount borrowed, etc.) is critical in achieving financial safety and abundance!