A secondary credit card holder’s responsibility for credit card debt depends entirely on how the card was set up and the specific terms of the credit card agreement. While some supplementary cardholders may not be liable for any charges, others could be fully responsible for all debt on the account. Understanding these differences is crucial before accepting or adding someone as a secondary cardholder.
Primary vs Supplementary Cardholders
Credit card accounts have distinct roles, and the distinction is very important in determining who is responsible for credit card charges. Let’s begin with an explanation of the differences between primary, secondary or supplementary cardholders and joint credit cards.
Primary Cardholder: This person opens the account, manages payments, and is fully responsible for any debts on the account.
As a primary cardholder, you:
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- Are responsible for managing the account
- Can add or remove supplementary cardholders
- Must make payments on the account
- Are legally responsible for the debt
Supplementary Cardholder: Credit card companies often allow an additional cardholder to become an authorized user on a credit card. It is common, for example, to add a spouse or child as a secondary cardholder.
Secondary cardholders generally:
- &]:mt-2 list-disc space-y-2 pl-8″>
- Can make purchases using the card
- Shares the full available credit limit
- Don’t have authority to make account changes
- Are not responsible for debt payments
- Cannot add other cardholders
Joint Credit Cards or Co-borrowers: While rare, it is possible to be a co-applicant or co-borrower on a credit card. This differs from a supplemental card in terms of card management and responsibility.
As joint cardholders, both parties:
- &]:mt-2 list-disc space-y-2 pl-8″>
- Share full account management rights
- Have both their names on the credit card statement
- Can make changes to the account independently
- Are legally responsible for the entire balance
- Cannot be removed without both parties’ consent
- Will have the account appear on both credit reports
Who Pays the Debt? Understanding Cardholder Liability
A primary cardholder is liable for all charges and debts on an account, whether charged with the primary or secondary card.
A secondary or additional cardholder is not responsible for paying back money owed on a credit card. Even though a supplemental cardholder can see the account in their individual online banking information, that does not mean they are liable.
If you have a joint credit card, you are fully responsible for the entire debt.
Impact on Credit Reports and Scores
Most Canadian credit card issuers report only primary user accounts to the credit bureaus, TransUnion and Equifax. Being a supplementary credit card holder will not impact your credit rating in Canada.
If you are a joint credit card holder or co-signer on a credit card, late payments or high balances on the primary account can negatively affect your credit score.
What Happens If the Primary Holder Defaults?
If the primary cardholder defaults, creditors cannot pursue a secondary cardholder unless they are co-borrowers.
In cases of significant default, a secondary cardholder may lose access to the account.
If one cardholder files a bankruptcy or consumer proposal, this does not affect a supplementary cardholder unless the debt is joint.
If you are concerned you cannot repay your credit card debt, we encourage you to talk with a Licensed Insolvency Trustee like Hoyes Michalos. This is a complicated area. We can help you review your credit card agreements and help either the primary or secondary cardholder, or both, find options to eliminate credit card debt. Your trustee can also explain how bankruptcy will affect your spouse and help you develop a plan together, such as filing a joint consumer proposal or bankruptcy if your combined debts are significant.
The post Is a Secondary Credit Card Holder Responsible for Debt? appeared first on Hoyes, Michalos & Associates Inc..
Stocks and other financial markets have been popular among new and seasoned traders, as well as those interested in profit without having to invest a whole lot of their money.
For an inexperienced trader or one who has not had success in the past, one of the most alluring ways to trade without losing your money is through a no-deposit bonus.
It provides you with actual funds and does not threaten your wallet.
To successfully utilize this approach, preparation, strategy, and a sense of the risks are required.
This article will teach you how to maximize no-deposit bonuses and will cover everything from the basics to the best brokers and effective strategies.
What are No-Deposit Trading Bonuses?
A no-deposit bonus is a type of incentive used by brokers to attract new clients.
You can trade on their platform without investing any of your capital because it usually comes with a fixed amount of funds.
These are typically intended for novice traders or those trying out never-used before.
Although they let you trade, they usually have restrictions, such as no options for withdrawals or conditions that must be met before you can access your profits.
The Advantages of No-Deposit Bonuses
- No upfront costs: Because individuals can start studying without committing any own funds, it is ideal for beginners.
- Practice under actual market circumstances: Unlike demo accounts, no-deposit bonuses allow you to trade in real-time market conditions.
- Test broker platforms: It provides an opportunity to test a broker, tools, and trading conditions before investing any money.
- Build confidence: Such a bonus is an attractive advantage for those interested in trading a specific market since they can practice without letting their capital be affected.
- Explore different asset classes: Numerous brokers provide no-deposit bonuses for a range of asset classes, including indices, commodities, and FX, which allows you to test out different markets and find the assets that best fit your trading style.
How to Choose the Right No-Deposit Bonus
Look closely at factors such as reputation, the availability of restrictions on the withdrawal of funds, and some others depending on the current market situation.
Pay attention to the level of customer support provided by the broker, as well as to the wealth of educational resources you will be able to use to help guide your trading.
Criteria for a No-Deposit Bonus
| Criteria | Explanation |
| Bonus amount | The initial amount provided to start trading |
| Withdrawal conditions | Conditions you must meet to withdraw profits |
| Trading platform | Tools, resources, and ease of use |
| Reputation | Broker’s reliability and user reviews |
Broker Resources and Support
Many brokers offer educational resources that can improve your trading knowledge.
If you’re just starting, resources such as webinars, articles, and tutorials can be beneficial.
Some brokers even provide market analysis and daily insights from industry experts, which can help you learn various techniques in real time.
These resources can enhance your understanding and offer valuable tips on tools and indicators.
No matter if it’s trading education or guidance on using the platform, broker-provided resources are valuable for those who want to make the most out of their no-deposit bonuses.
How to Develop a No-Deposit Bonus Strategy
There are four main steps to help you create a strategy for no-deposit bonuses.
#1. Start with Basic Knowledge
Beginners should start with a solid trading education, such as an online course, to understand concepts like technical analysis, indicators, and risk management.
There are a lot of free resources that can help you develop a deeper understanding of the process before diving into live market scenarios.
#2. Set Realistic Goals
Set achievable targets regarding profits and the frequency of trades.
Remember, the primary purpose of a no-deposit bonus is to help you learn without risking personal funds.
This is an opportunity to understand how market conditions work, rather than focusing solely on earning high profits.
#3. Select a No-Deposit Broker
Not all online platforms are the same, and finding one that fits your goals and offers transparent terms can be challenging.
You can start your search by giving Andre Witzel’s list of the best Forex brokers with no deposit bonus a quick look.
It will provide you with an excellent starting point and will help you identify reliable platforms that align with their objectives.
#4. Practice Risk Management
Implement measures such as stop-loss orders and limiting trade sizes to prevent large losses.
Managing risk is one of the core aspects of effective trading, as it keeps you from depleting the bonus too quickly.
If you take calculated risks, you’ll be better equipped to handle market volatility.
Essential Risk Management Techniques
- Use stop-loss orders: Limit losses by setting exit points in advance.
- Diversify trades: Spread trades across different assets to minimize risks.
- Control position sizes: Avoid large positions that could quickly wipe out your bonus.
The Importance of Terms and Conditions
Every no-deposit bonus has terms, many of which contain guidelines for withdrawing earnings.
Be sure to read and comprehend them in full.
Certain bonuses may have expiration dates or other limitations, while others may need a specific trading volume before gains may be withdrawn.
Understanding these requirements enables you to create a plan that complies with the bonus terms.
Because some brokers limit access to specific instruments, it’s also critical to know which markets or assets are available for trading using the bonus.
Analyze Market Conditions Before Each Trade
No-deposit trades do not equal reckless ones.
Conduct a thorough analysis of market conditions before executing each trade.
Use technical analysis tools and follow market news to make informed decisions.
Analyzing trends and staying updated on global events can significantly impact your performance.
Key Indicators to Monitor in Market Analysis
| Indicator | Purpose |
| Moving averages | Identify trends and smooth price movements |
| Relative strength index | Determine overbought or oversold conditions |
| Moving average convergence/divergence | Measure momentum and trend direction |
Strategies to Maximize Profits with No-Deposit Bonuses
Once you’ve selected the right broker, it’s time to develop strategies that can maximize the profit potential of your no-deposit bonus.
Remember, the key is to trade carefully and strategically to avoid unnecessary losses.
- Focus on high-probability trades: Prioritize trades with higher success potential by using technical analysis.
- Avoid excessive trading: It can lead to quick depletion of funds, especially with limited capital.
- Withdraw profits smartly: Check withdrawal conditions and withdraw gains as soon as requirements are met.
When to Transition from No-Deposit to Funded Trades
If you’ve developed a level of confidence and experience through the bonus, consider depositing to gain full access to all broker features.
Funded trades offer more flexibility and remove the restrictions often associated with no-deposit bonuses.
Transition to a funded account to further enhance your learning and growth as a trader and gain the freedom to test more strategies and access additional market tools.
However, it’s crucial to only move forward when you feel prepared and have developed a solid understanding of the basics here.
The Role of Courses and Further Education
Constant education is critical in trading practices.
Once you have a wealth of basic knowledge of no deposit bonus, you can proceed to an elaborate online course.
These often provide more specific training as well as information you will not find anywhere else.
Because of this, additional knowledge from experienced traders can be much deeper and can make your foundation stronger.
Make the Most of No-Deposit Bonuses
No-deposit bonuses present a valuable opportunity to begin trading without personal financial risk, especially for those just starting to learn.
Select the right broker, develop a sound strategy, and adhere to effective risk management practices to maximize the benefits of these bonuses and build a foundation in real conditions.
- Read now: Here are the best long term investments to build wealth
- Read now: You need to know these investing risks before investing
- Read now: See why listening to Dave Ramsey’s investing advice is trouble
The post How to Make the Most of No-Deposit Trading Bonuses appeared first on Money Smart Guides.
Freecash is a popular reward site claiming that its users can easily make $100 a month on its platform. But is Freecash legit or is this just all smoke and mirrors and no money? You don’t need me to tell you that most of could use some extra money. After all, 78% of Americans are… Continue…
The post Is Freecash Legit Or a Scam? (My Honest 2024 Review!) appeared first on MoneyPantry.com.
We also talked about the impact of the deficit on the stock market, how tariffs work, the long-term trend of interest rates and how to fix government debt levels.
Further Reading:
The Relationship Between Wages and Inflation
The post Is the United States Going Broke? appeared first on A Wealth of Common Sense.
…
Be good. Be smart. Get good grades. Challenge yourself as much as practicable. Get into a good college and do well there. Get a well-paying job. Get promoted, then lather, rinse, and repeat. Save money (“save” being undefined). Buy a house. Get married. Take nice vacations and buy lots of nice things (“nice” = expensive, because expensive = “nice”). Maybe buy a vacation home. Have kids. For all of these steps, take on debt if you need to. Even a lot of it. Because the ends justify the means. Fast forward to age 65 or so and retire.
Such are the things I was told lead to and constitute a good life. Maybe you were told the same
Being the ever-dutiful, rule-following bloke I was am, I did as I was told. And asked no questions. Maybe you did, too.
I walked the line
So, I was a goodish kid. I was alleged to be smart. I hoodwinked my teachers got good grades. I challenged myself and often was duly humbled. I got into a good college (a state flagship college) that accepted a nosebleed-high percentage of in-state students and then law school and there, too, I hoodwinked my teachers got good grades. I got a good job after years of trying and struggling. I got promoted because my competition was weak. I saved money (no small percentage of which sat idly in a checking account for decades). I bought a condo house. I got married to someone silly enough to marry down . . . way down. I took fairly expensive nice vacations and bought my fair share of fairly expensive nice things. I and The Missus took on some debt, too that in some cases we didn’t need to.
I never did buy that vacation home. But, hey, the “maybe buy a vacation home” implies that doing so was discretionary, not a mandatory step for living a successful life.
But for Father Time not yet having advanced my age to 65 and thus allowing me to retire, I’ve lived a successful life. Right? . . . Right?
Rrriiigggghhhttt.
But you know what I discovered? That after checking these boxes and reached the peak of these accomplishments, I wasn’t living my best life.
If you’re not entirely happy and you know it, clap your hands!
Sure, The Family (The Missus, Thing One (The Elder), and Thing Two (The Younger)) was great. To be sure, I had no complaints about the personnel. But The Missus worked/works full time. So, our time together necessarily was limited to the few hours we had together before and after work, and on weekends and days off. And Thing One and Thing Two were in daycare or after-school care for years. And after those years, I essentially had the same limited amount of time with them as I did with The Missus. I almost never missed attending/seeing any of the kids’ notable events. But I missed out on an incalculable number of quality hours with them.
Also, while we owned our residence, I discovered that The American Dream of home ownership held little allure for me. And while we took nice vacations and had nice things and saved money, we weren’t building anxiety-limiting or -eliminating wealth.
And my job, where I finally was earning a salary I’d once only have dreamed of? I no longer loved it. I maybe didn’t even like it much anymore. Certainly not the baggage that came with it.
What the flute happened?!, I thought to myself.
Clearance sale
Clarity came to me like a bolt of lightning when I discovered FIRE. Not just because of the money-related aspects. Although they were key. No, it was exposure to this notion that gripped me: The definition of “success” that’s been drilled into you is at best questionable. Maybe even dead wrong (even if for you alone). Here’s an unconventional path that might more positively resonate with you.
And resonate it did.
My mindset changed. And with that, the playing field and goalposts, too. What I found that I really wanted wasn’t professional success, pricey material things and experiences, or “status” amongst family, friends, or acquaintances. And certainly not silly debt. No, I didn’t care if I had any of those things. Rather, I craved financial security, to be financially beholden to no one, and control over my time.
In the beforetimes, I felt like I was draped in the cloak of a life that never felt comfortable. Afterward, I felt like we’d swapped that life for one that felt like it fit me as well as an immaculately tailored suit.
Within six short years, I FIREd. And things now are . . . better. Pretty darned good, in fact.
Loss inversion
The great irony is that little of what came before was a loss. Not at all. Heck, my past self laid the groundwork for fast-tracking what followed. Things moved so smoothly and quickly because we’d followed the conventional wisdom so well, for so long, and had the good sense never to have (over-) extended ourselves financially. By the time we pivoted, we were headlong on the way to FI.
But that pivot was everything. Before it, we were doing “fine.” But, for me, the road ahead was long, fog-shrouded, and squarely headed in a direction that no longer (if ever) held complete allure for me.
I didn’t want forces mostly outside my control (but that could be brought within it) limiting my time with The Family. I didn’t want to work the type of job I had and those that’d likely follow as I “progressed.” Much less until age 65 or later. I didn’t want all the fancy-pants/expensive stuff and experiences that I was told I should want. I didn’t want debt. And I cared not at all whether others were impressed by me for reasons other than who I really am.
Post-discovery of FIRE, I no longer questioned what I wanted. Or what I thought I wanted. Or what I thought I should want, according to conventional wisdom.
No, I knew exactly what I wanted. And I got it. At least 10 years before I otherwise might’ve. Maybe 20 or more.
And in the end . . .
Now, Dear Reader, you may ask if things would’ve moved so smoothly and quickly (or moreso) had I learned about FIRE far earlier and followed the path far earlier, or even from the outset? Maybe. But that wasn’t the case for me/us. So, there’s little use in gaming out counterfactuals.
The post I Lived a Life I Thought I Wanted to Live to Live a Life I Actually Wanted to Live appeared first on FI for the People.
One of the core philosophies behind Lazy Man and Money is that you can manage your money without a lot of work. Typically, you set up a system once, such as contributing to a 401k plan, and then review it once or twice a year. Combining a good income and a few good systems is enough for most people to achieve financial success.
If you are following this bare minimum philosophy of financial management, this is one of the times I want you to be active. You may not have noticed it, but the stock market has been soaring for a long time now. It soared before the election, and it continued to soar after the election.
A high stock market isn’t necessarily cause for concern. There are many, many times when the stock market just keeps going up and up. Depending on the stock market index, it has reached a new high of 50 days or more this year. Here’s what investing $100 in the S&P 500 in 1980 would be worth according to this website.
Click the image above so that the website opens in a new tab. We’ll refer back to it, and it will be handy to follow along with your mouse on certain dates.
Do you see any point where you’d like to cash out? Sure, there have been little hiccups for a couple of years here and there, but overall, you would have wanted your money in the market for the last 45 years.
Here’s an exercise. Pick a year like 2014, 2017, or 2021. Cover up the chart to the right and just look at what it was doing on the left. In all those years, it was already setting new highs. Then you move your hand away and see that it continued to set even more new highs.
We don’t know if we are in one of those years. Even though the stock market is setting new highs, it might continue to set even more highs.
However, I’m going to present you with another chart. This is the Shiller P/E or CAPE.
Like with the S&P 500 chart, click that image for it to open in a new tab.
This chart measures the price of the stock market relative to the earnings. Earnings are critical because if companies aren’t making money, investors won’t pay a high price for them. Looking at the chart carefully, you see some obvious peaks and valleys. For example:
- 1929
There’s a big peak here. Have you heard about the stock market crash of 1929? That happened in October, but if we had this indicator, some smart people could have seen the PE number at 31 and decided that the stock market’s price was too high for its earnings.
- 1982
I’m jumping ahead to 1982 so we can match it with our S&P 500 chart above. You’ll notice that the Shiller PE was a lowly 6.64. That wasn’t only the cheapest in decades at the time, but the stock market hasn’t gotten cheaper since then. The huge growth in the S&P 500 chart makes sense now.
- 1999
Are you old enough to remember the dot-com bubble?. As Wikipedia describes, “…investments in the NASDAQ composite stock market index rose by 800%, only to fall 78% from its peak by October 2002.” The Shiller PE hit an all-time high of 43 in October of 1999. It would have been reasonable to see it hit 35 and start to diversify away from big tech winners that had gone up so much.
- 2008
Perhaps you remember the Great Recession in 2008? In this case, the Shiller PE of 25 didn’t tell us that stocks were very expensive. However, if you look at the Shiller PE, it sank to 14 in 2009 – the cheapest the stock market has been since the late 1980s. I know it is hard to invest cash that you don’t have because of the recession. However, if you did have money to invest, it was a great time to buy as you’d ride a wave of a bull market up to COVID.
- 2021
Lastly, we have the drop of the Shiller PE in October 2021. It was at 38 and dropped back down to 28. The S&P 500 would drop 21% in early 2022 due to high inflation and the Fed raising rates. We may not have known those were coming. However, we did know that a Shiller PE of 38 was historically high and has led to a crash. The previous times, it was above the 30-35 range.
So what about today?
The S&P 500 is up 26% since the start of the year. There is a lot of optimism that the new administration will lower taxes, decrease regulation, and generally help businesses boost profits. It’s also likely the Federal Reserve will lower interest rates, which pushes people to invest in the stock market for more profits. It should be a great business environment.
However, that Shiller PE is at 38 again. That tells us that the market is historically very expensive. In my opinion, everything is priced for perfection – there is no margin for any negative news.
With the stock market up so much, this is a great time to look at your portfolio and see if your investment allocation is where you want it to be. I see the trend in the Shiller PE and feel like we could have a bear market like the other times it got as high as it is. I’m going to sell off some high growth stocks in my portfolio and buy more bonds and high dividend stocks like consumer staples. These investments usually hold better when there is a crash.
What if the stock market keeps going up? Well, I always stay invested, so I will still make some gains. If you like this article and would like to get future articles delivered directly to your inbox, use the form below to sign-up for free.
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The post Rebalance Your Portfolio appeared first on Lazy Man and Money.
State debt across the U.S. has surged to new highs, posing serious challenges for residents. When states carry debt that outpaces revenue, it often creates financial strain, leading to budget cuts and the possibility of tax increases.
This burdens consumers with rising living costs and skewed debt-to-income ratios. To shed light on this fiscal challenge, World Population Review delves into the national debt landscape, analyzing government debt levels across different states. Read the rest
The Big Picture On Rent To Retirement:
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- Investing in rental properties can provide a stable income for retirement, with options like steady monthly rent, lump-sum cash from sales, and equity loans. This makes it a sustainable alternative to traditional retirement funds.
- Rental income can enhance retirement stability, allowing for regular cash flow even after the property mortgage is paid off. Additionally, selling the property or borrowing against equity can provide financial flexibility when needed.
- While real estate investment offers significant retirement advantages, consider factors like property management, tax implications, and long-term planning for sustainable benefits.
Disclaimer
The information provided on this website is for general informational purposes only and should not be construed as legal, financial, or investment advice.
Always consult a licensed real estate consultant and/or financial advisor about your investment decisions.
Real estate investing involves risks; past performance does not indicate future results. We make no representations or warranties about the accuracy or reliability of the information provided.
Our articles may have affiliate links. If you click on an affiliate link, the affiliate may compensate our website at no cost to you. You can view our Privacy Policy here for more information.
(Guest article by Michelle Cornish, CPA)
Most North Americans aren’t on track for retirement, according to a recent survey conducted by Bankrate.
I spent sixteen years working in public accounting, where I helped people with their taxes and retirement planning. Over and over, I found that people fear they haven’t saved enough for retirement. Nearly everyone wonders, “Do I have enough?” “How do I know my 401k won’t run out?” and “What happens if the stock market crashes right after I retire?”
The good news is that there is more than one way to retire comfortably. One way is to start investing in rental properties before retirement.
Consider three of the ways rental properties can ensure a comfortable retirement:
- Steady monthly income,
- Lump sum cash payout, and
- Equity loans.
Stocks typically must be sold to supplement retirement income, and bonds eventually finish paying out. In other words, traditional nest eggs risk running empty at a certain point, but rental properties keep paying indefinitely.
Why Rental Properties Make Smart Retirement Assets
Let’s dive in and take a closer look at these advantages of rentals for retirement, shall we?
Steady Monthly Income
Rental income is a great supplement to other income you may have in retirement. It can even provide the bulk of your retirement income!
Ideally, you’ve owned the property long enough that the mortgage is paid in full. This increases your monthly cash flow because you don’t have to worry about paying the mortgage out of the rental income you receive.
If the property has been well maintained over the years, then your only major repair bills should be CapEx (capital expenditure)-related. You can also increase the rent to raise yourself. Just ensure you stay within the confines of your local and state landlord-tenant laws. There are often rules regarding how often you can raise the rent and by how much.
If you feel like being a landlord is too much work, consider whether you’d rather bust your butt to contribute to that 401k… or find a job that even has a 401k plan. There are tons of great resources for landlords to help make it simple. Check out this landlord survey with many great tips, including 5 critical factors to consider when screening tenants.
Important Financial Aspects of a Rental Property Investment
Thoughtful planning around these aspects of rental property ownership can help create a more stable retirement income stream.
| Considerations | Impact on Retirement Planning |
| Property Management Options | Hiring professionals reduces time commitment but affects income |
| Tax Advantages | Multiple potential deductions available for rental property owners |
| Emergency Fund Planning | Essential to maintain reserves for unexpected vacancies |
| Insurance Requirements | Additional coverage needed compared to standard homeowner policies |
| Long-term Wealth Building | Benefits from both rental income and property appreciation |
| Location Strategy | Property values and rental demand vary by neighborhood and region |
| Maintenance Schedule | Regular upkeep helps prevent costly repairs and maintains property value |
Lump Sum Cash Payout
Unlike lump sum pension payouts, when you own rental property, it’s up to you when you receive a lump sum payout. A lump sum payout from real estate investing occurs when you sell your property. The payout amount will depend on how much the property has gone up in value, how much of the mortgage you have left to pay, and how much capital gains tax you will owe on the sale. However, in the U.S., long-term capital gains tax rates (0%, 15%, or 20%) apply depending on the household income.
Here are ten things you can do yourself to increase the value of your property as much as possible.
Tax laws can vary depending on where you’re located, so consult with a tax professional before your sale is complete or even before you decide to sell the property.
Be sure to consider timing and taxes before selling any properties. If you own more than one rental property, you may want to time the sales so they end up in different taxation years so you can save the most tax (and keep the most cash) from each sale.
Equity Loans
If you have equity in your rental property but are not ready to sell yet, or if you’d prefer to pass the property on to your heirs but still need a quick influx of cash, you can always borrow against the property’s equity. This can be a risky move, though, so make sure you know what you’re getting into before you do it.
A major advantage of an equity loan is that it’s not considered income, so you won’t be taxed on it. But you need to pay it back with interest, so proceed cautiously.
You’ll also want to know what will happen to the debt when you die, especially if your goal is to pass the property on to your heirs. A required loan payout on death (like in a reverse mortgage situation) may force your family members to sell the property, which is not what you want.
If you are considering borrowing against your rental property, do so cautiously. It’s critical to fully understand the contract terms, required repayments, interest rate, and what happens to the loan when the property transfers to your heirs. Work with a reputable lending professional you know and trust, or get a referral and triple-check their references.
How Many Properties Do You Need for Retirement?
Let’s tackle the question that keeps many aspiring real estate investors up at night – how many rental properties do you actually need for a comfortable retirement? The answer starts with understanding your target monthly income. Calculate your expected monthly expenses in retirement, then add a 20% buffer for unexpected costs and inflation.
A practical approach is to work backward from your target monthly income. For example, suppose you need $5,000 monthly in retirement income, and each property generates an average of $500 in monthly cash flow after all expenses. In that case, you’d need approximately 10 properties to reach your goal. However, remember that property values and rental rates vary significantly by location.
To calculate potential cash flow, use this simple formula:
Monthly Rent – (Mortgage + Property Taxes + Insurance + Maintenance Reserve + Property Management) = Monthly Cash Flow.
For instance, a property renting for $2,000 monthly might have $1,500 in total expenses, which leaves you with $500 in cash flow. To be conservative in your calculations, factor in vacancy rates of 5-10% annually.
Finding Properties That Actually Earn
I’ve noticed that investors who take their time choosing properties usually come out ahead. Let me share what I’ve learned about picking the right properties for retirement income.
First, you want to look at the neighborhood’s future, not just its present. Is the area growing? Are new businesses moving in? When will these changes occur? These kinds of changes can mean good things for your property values and rental rates down the road. Many investors I know make good money just by spotting these trends early.
As for the property, consider the big-ticket items that can affect your retirement income. How old is the roof? What about the HVAC system? Although these aren’t very exciting questions, they’re important ones. Trust me, the last thing you want is to drain your retirement savings on major repairs when you should enjoy that rental income.
Also, there are other factors you can consider – who are your future tenants likely to be? Are you near a university that ensures a steady stream of renters? Or, maybe you’re in a family neighborhood where tenants tend to stay longer? Knowing this helps you choose properties that will keep bringing in that steady income.
So, take your time, do your homework, and remember that each property is a long-term part of your retirement plan.
Smart Ways to Finance Your Rental Portfolio
I’ve seen investors use several different approaches, and each has its place in your retirement strategy.
Traditional mortgages are what most people think of first, and they’re certainly common for a reason. You’ll typically need to put down 15-25% of the purchase price. While this might seem like a lot of cash upfront, it’s actually a great way to leverage your money to control a more valuable asset.
Another one is the self-directed IRA accounts; they let you use your retirement funds to invest in real estate. It’s a great option if you’ve already built up some retirement savings but want to redirect them into rental properties. Just be careful, though—there are strict rules about using these properties, and you’ll need to work with a qualified custodian.
And then there’s the 1031 exchange – an option I’ve seen many successful investors use. Think of it as trading up your properties without taking a tax hit right away. You can sell one property and buy another of equal or greater value while deferring those capital gains taxes. However, always consult with a tax professional (as I always told my clients) before entering a 1031 exchange, as the rules can be tricky.
What About Reverse Mortgages?
A reverse mortgage works differently than an equity loan. Generally, you borrow against the property’s equity with a reverse mortgage, like a home equity loan. However, unlike a home equity loan, the balance of the reverse mortgage goes up over time instead of down, which is why a payout is required when you die.
You can’t get a reverse mortgage on a rental property, but you could get a reverse mortgage on your own home and use that to purchase a rental property if you’re late to the retirement game and wish you had purchased one when you were younger.
Still, you could probably accomplish the same thing with a home equity loan at a lower interest rate. Be sure to research your options carefully.
It’s important to make sure a rental property is the right investment for you. Before investing, ensure you understand how to calculate your net cash flow from the rental to avoid a bad investment.
Of course, as a CPA, I have to mention tax consequences. They are always there, lurking in the background. Rental properties come with some excellent tax deductions, but when it’s time to sell, be prepared to pay the tax collector. To be perfectly safe, contact tax consultants for changes, as they happen all the time and it can be hard to keep on top of all of them.
Before you get carried away with your real estate investing, read these important lessons and always check with a certified tax professional who knows the ins and outs of real estate investing to ensure you’re getting the most up-to-date tax advice possible. Tax laws change constantly, and you don’t want to be caught off-guard!
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The post Rent To Retirement: Building Wealth Through Rental Properties appeared first on SparkRental.
Setting up a first investment property can be exciting but also overwhelming, especially if it’s your first time. Many people dive in with high hopes of quick profits but quickly find that managing an investment property is more complex than they anticipated. Without careful planning, new investors can run into costly pitfalls.
From misjudging finances to overlooking hidden costs, first-time investors should be cautious and informed. Here’s a guide to avoid common mistakes and make the journey to owning a successful investment property smoother and more profitable.
Source: Unsplash(CC0)
Not setting a realistic budget
One of the biggest mistakes new investors make is underestimating the costs involved in setting up a property. They might think the property price and a few minor repairs are all that’s needed, but in reality, expenses can quickly add up. Things like insurance, property taxes, maintenance, and emergency repairs are often overlooked, causing financial stress down the road. Creating a realistic budget that includes these hidden costs is essential.
In addition, skipping on reserve funds is a risky move. Having a financial cushion allows owners to handle unexpected issues like a broken heater in the winter or sudden tenant turnover. Always overestimate your budget slightly to be prepared for the worst.
Ignoring financing options
Financing an investment property is more complex than a traditional home loan, and many first-time investors don’t fully understand their options. It’s essential to research options like a DSCR loan, which considers the property’s cash flow rather than the buyer’s income. This type of loan can be a good fit for those looking to expand their portfolio quickly.
Choosing the wrong financing option can lead to high interest rates and heavy debt, which may eat into profits. Understanding and comparing different loan types can make a massive difference in long-term success.
Focusing only on high-end properties
Many new investors dream of owning a luxury property, thinking it’ll attract high-paying tenants. However, luxury properties come with their own set of challenges, including higher maintenance costs and a smaller pool of renters. High-end properties may sit empty longer if a high-paying tenant isn’t available, which affects cash flow.
Instead, looking at more affordable properties in popular rental areas often yields a steadier income. Mid-range properties are easier to rent, easier to maintain, and generally offer a better return on investment for first-timers.
Poor property management
An investment property is only as good as its management, yet many new investors overlook this aspect. Failing to maintain the property, respond to tenant concerns, or keep up with repairs can quickly turn a profitable investment into a burden. Regular inspections, prompt maintenance, and effective communication keep tenants happy and prevent small issues from escalating.
Good property management builds a positive reputation among tenants and can attract referrals, creating a stable, profitable investment for years to come.
So if you’re just getting started with investment properties or are struggling to make them work, we hope that this post has given you a few ideas to help avoid potential pitfalls in the near future.
The post Common Mistakes to Make When Setting up Your First Investment Property appeared first on brokeGIRLrich.
The Big Picture On Blanket Mortgages:
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- A blanket mortgage consolidates loans across multiple properties, helping real estate investors simplify their portfolio management, reduce closing costs, and potentially negotiate better loan terms.
- By using equity from existing properties as collateral, investors can expand their portfolios without large down payments. This makes blanket mortgages especially useful for buy-and-hold investors, house flippers, developers, and business owners.
- Although blanket mortgages offer benefits like simpler management and reduced costs, they come with pooled risk and shorter loan terms. A default affects all covered properties, and fewer lenders offer them.
Disclaimer
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Always consult a licensed real estate consultant and/or financial advisor about your investment decisions.
Real estate investing involves risks; past performance does not indicate future results. We make no representations or warranties about the accuracy or reliability of the information provided.
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Who says you need a separate loan for every single property?
As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.
Enter: blanket mortgages.
What Is a Blanket Mortgage?
A blanket mortgage is a single loan attached to multiple properties. As terms in real estate investing go, the blanket mortgage definition is pretty simple.
For instance, say you come across a seller looking to sell her entire portfolio of eight properties. You could try to arrange eight separate landlord mortgages — or you could negotiate one single mortgage that covers all eight properties.
Note that the lender attaches a lien against each property. If you default on your mortgage payment, they file for foreclosure on all secured real estate properties.
Lenders usually include a partial release clause with blanket loans to cover the event of the borrower selling one property. Unlike traditional mortgages, you don’t have to repay the entire loan when you sell a property. Typically, the seller repays a proportionate percentage of the loan balance or allows the borrower to put the sale proceeds toward buying a replacement property (which the lender places a new lien against). Think of it like a 1031 exchange for your blanket loan.
Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.
However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.
What Else to Know About Blanket Mortgages
For some real estate investors, blanket mortgages’ flexibility and streamlined nature make them an attractive financing option compared to juggling multiple traditional loans.
| Aspects | Details |
| Best Suited For | Large-scale property investors and developers |
| Documentation | Simplified compared to multiple individual mortgages |
| Closing Costs | Lower than getting separate mortgages for each property |
| Main Advantage | Single monthly payment for multiple properties |
| Key Requirement | Properties must meet the lender’s minimum value criteria |
How to Use a Blanket Mortgage
Homeowners don’t typically use this type of loan. Most traditional home loans backed by Fannie Mae and Freddie Mac don’t allow cross collateralization for primary residences or second homes.
However, investors who may own dozens of properties need to understand a blanket mortgage and how to use it effectively.
Buy-and-Hold Investors
Landlords who buy and hold real estate can use blanket loans in several ways.
To begin with, landlords can use a blanket mortgage to buy a portfolio of properties all at once, as in the example above. Alternatively, rental investors can use a blanket landlord mortgage to avoid coming up with a down payment.
It works like this: imagine you have an investment property worth $150,000 with an $80,000 mortgage. If you want to buy another property for $150,000, the lender requires a 20% down payment. Rather than come up with $30,000 in cash for the down payment, you offer your equity in your existing property as part of a blanket loan.
The lender puts a second lien against your existing property and attaches a lien against the new property you buy. Thus, they have liens against two properties, so if you default, they foreclose on both.
It’s another way to tap equity in your existing properties beyond refinancing or taking out a HELOC against a rental property.
Speaking of refinancing, some property owners refinance several separate loans into one blanket mortgage. In doing so, they consolidate into one loan, possibly with a lower interest rate or a more favorable term.
House Flippers
Investors who flip houses can also use blanket loans to buy multiple properties at one time under one loan.
They don’t have to pay off the entire mortgage as they complete the renovations and sell off each property. They either pay the loan balance or buy an additional property under the blanket loan.
Real Estate Developers
Similarly, property developers use blanket real estate loans to buy large tracts of land, which they subdivide and then build on.
They sell individual plots one by one and either pay down their loan balance or acquire new tracts to place under the blanket loan.
Business Owners
Businesses buying several new locations often use a blanket mortgage. It works just like a residential mortgage, with one loan covering several commercial buildings.
Or, businesses can offer up existing properties with equity as additional collateral to avoid a down payment.
Finally, businesses can refinance multiple commercial mortgages into one blanket loan. It works the same way for them as for residential landlords.
Who says you need a separate loan for every single property?
As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.
Enter: blanket mortgages.
Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.
However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.
Pros of Blanket Mortgages
As with everything else in investing (and life), blanket real estate loans have their fair share of pros and cons.
Make sure you understand both before committing to this type of financing!
Lower Closing Costs
Every time you hold a real estate settlement, you incur closing costs. Buying, selling, and refinancing all involve thousands of dollars in closing costs.
So, rather than holding five different settlements when you buy a portfolio of investment properties, why not hold one?
Lenders charge flat fees in addition to points (based on the loan amount). By taking out a single mortgage rather than five, you only pay one set of flat fees.
The same principle applies to title fees—while title companies charge by the title search, they also charge many flat fees per settlement. Doing one settlement means paying one set of those fees.
More Negotiable Loan Terms
When you take out ten garden variety $200,000 landlord mortgages, you don’t have much negotiating power with any of them.
They pay more attention when you approach a blanket mortgage lender about a $2 million loan. They want your business.
Plus, it involves less work for more money on the lender’s part. They only have to process and underwrite one loan, not five or ten.
This means borrowers can often negotiate a lower interest rate, lower points, or otherwise favorable loan terms, which can, in turn, mean better cash flow and higher returns on their properties.
Simpler Money Management
If you only have one loan to pay and manage each month, rather than 10, 20, or 50, it keeps your accounting simpler.
In contrast, keeping track of dozens of monthly mortgage payments can confuse you and your books.
Avoid Down Payments by Tapping Equity
Real estate investors can use a blanket mortgage to buy properties with no money down if they offer up existing properties with equity as additional collateral.
No refinancing is necessary, no HELOC, and no selling your existing properties to fund future purchases.
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Cons of Blanket Loans
Blanket mortgages come with downsides, too, not just perks. Remember the following as you consider taking out a blanket real estate loan.
Pooled Risk
First and foremost, when you pool multiple assets under one loan, you pool a certain amount of risk.
If you default, you lose not one property but all the individual properties under the blanket loan to foreclosure.
If you keep your loans separate, then you also isolate each one. You can default on one loan and only risk losing that one property.
Shorter Loan Terms
Blanket mortgage loans often come with short loan terms, often 10 or 15 years. Those may be amortized over just 10 or 15 years, with monthly payments calculated accordingly. Or the monthly payments may be calculated on a longer amortization schedule with a balloon payment due after 5-15 years. (A balloon payment requires the loan to be paid in full, even though the monthly payments were calculated on a longer schedule.)
In contrast, residential mortgage loans usually allow up to 30-year terms, and commercial property loans typically allow up to 25-year terms. These longer terms mean lower monthly payments and more flexibility when paying off your loan.
Short-term loans can add interest rate risk, which is the risk that financing will cost more by the time the balloon “pops.”
Fewer Lenders Offer Blanket Mortgages
Not all lenders offer blanket loans. In fact, most don’t.
Conventional mortgage lenders following Fannie Mae or Freddie Mac loan programs don’t typically allow blanket mortgages.
Many portfolio lenders — who keep their loans in-house on their books rather than selling them — don’t allow them either. Portfolio lenders come in many shapes and sizes, from local community banks to online lenders like Visio and Kiavi to commercial lenders.
Build your financing toolkit now so you have many lending options before you have an off-market deal lined up that needs to close quickly.
More Lender Scrutiny
Blanket mortgages are more complex for the lender, and because they have a higher loan amount, they are scrutinized more closely.
Lenders may require higher credit scores for these loans or offer lower LTV (loan-to-value ratios) loans. You may end up with the bank manager underwriting your loan rather than the run-of-the-mill underwriter that normally reviews loan files.
Where to Borrow Blanket Mortgages
Since fewer lenders actually offer them, it raises an important question: Where can real estate investors take out a blanket loan?
Start by inquiring with the lenders you already work with. Portfolio lenders who specialize in working with real estate investors often allow them. Here are a few lenders to reach out to:
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- Visio
- Kiavi
- Lending One
- Civic Financial
- RCN Capital
- Lendency (short-term purchase-rehab loans only)
You can also contact local community banks to ask if they offer blanket loans to real estate investors.
Finally, for commercial lenders and construction loans, try out:
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- RCN Capital (commercial & mixed-use)
- Commercial Loan Direct (commercial or construction, minimum loan: $1 million)
- Lendency (construction loans)
Blanket Loan Fees
What do blanket loan fees look like compared to conventional loans or other types of mortgages?
While you’ll probably pay just as much in loan points, you can expect to save money on flat fees. Instead of paying flat junk fees for each mortgage, you only pay one set of fees.
However, you’ll still need to pay appraisal fees for each collateral property.
Blanket Loan Eligibility and Requirements
Unlike traditional home loans, lenders scrutinize these applications much more carefully – and for good reason, given the higher loan amounts and complexity involved.
Most lenders require a minimum credit score of 680, though many prefer 720 or higher. You’ll typically need to show a debt-to-income ratio below 45% and substantial cash reserves—often 6-12 months of mortgage payments for all properties combined.
Experience matters, too. However, it’s not a hard rule. Some lenders may consider first-time investors if they show other strong qualifications.
Your business plan is also useful. Lenders may want detailed financial projections like expected rental income, maintenance costs, and even your exit strategy. They might also look at the properties themselves—most require them to be in good condition and in markets with stable or growing real estate values.
The Process of Getting a Blanket Mortgage
Securing a blanket mortgage takes more preparation than a traditional home loan. Before you start looking for deals, you’ll need to assemble a comprehensive package showing lenders you’re a serious investor.
Start by gathering your paperwork. You’ll need documents like tax returns, recent bank statements, evidence of your rental property experience, and detailed financial records for any existing properties. Have those purchase agreements and property inspection reports ready for new purchases.
The next step is connecting with the right lender. Circle back to the lenders we mentioned earlier, you can start there. Local community banks often offer surprising competitive terms, so pay attention to them. Also, compare rates, terms, and release clause conditions across multiple lenders.
Your formal application comes next, along with that solid business plan showing how you’ll manage these properties profitably. Expect a longer underwriting process—typically 45-60 days. However, it’s worth noting that complex blanket loans can take up to 90 days. The lender will need appraisals for every property involved and will dig deep into your financial background.
You’ll receive a commitment letter spelling out all terms and conditions if approved. This is where having a good real estate attorney pays off – have them review everything before you sign. Once you’re comfortable with the terms, you’ll move to closing, where you’ll sign the final documents and receive your funding.
Tip: Plan for this process to take 60-90 days from funding application. Having your documentation organized from the start can help speed things along, but blanket mortgages simply take longer to process than traditional loans.
Blanket Mortgage FAQs
It’s time to address some frequently asked questions regarding blanket loans. Feel free to reach out to us if you have more questions.
How Do Blanket Mortgages Impact Credit Scores?
The initial hit to your credit score from a blanket mortgage application is similar to any mortgage inquiry. Regular payments can boost your score over time, but remember – a default could damage your credit more severely than defaulting on a single property loan since multiple properties are involved.
Is Refinancing Possible with Blanket Mortgages?
Absolutely. You can refinance into another blanket mortgage or split it into individual loans. The key is timing—look for favorable interest rates and strong property appreciation. Just remember that refinancing multiple properties at once means multiple appraisal fees.
What About Property Management?
Although the mortgage may be combined, you’ll still manage each property individually. Most successful investors use property management software to track separate income and expenses, even though they make one monthly mortgage payment.
Are Blanket Mortgages More Expensive?
Not necessarily. While interest rates might be slightly higher than traditional mortgages, you’ll save on multiple closing costs. The real cost advantage comes from streamlined management and leveraging equity across properties.
Can I Add Properties Later?
Many blanket mortgages allow you to add properties, but it usually requires a modification of the loan terms. Some lenders are more flexible than others, so if you plan to expand, discuss this upfront.
Final Thoughts on Blanket Mortgage
What is a blanket mortgage? Useful, that’s what.
As you scale your real estate portfolio and explore pooled property purchases (say that five times fast), blanket loans can save you money and simplify your books. As you build equity in existing properties, this type of loan offers another way to tap into that equity and avoid down payments when buying additional properties.
Start networking with blanket mortgage lenders before you actually need them, so you can move quickly on your next deal.
How do you plan to use blanket mortgages for your own real estate investments?
More Real Estate Investing Reads:
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