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How I Used My Home Equity to Generate Passive Income
My first home turned into negative value within six months of buying it. I eventually had to short sale. I learned a painful lesson: never buy more than you can afford. I did not make the same mistake when re-entering the real estate market and buying my second home. Yet, there was something new to learn: How do I invest my home equity?
I had accrued equity after seven years of living in my second home. This was a pleasant situation, especially since my first time had a substantial loss. Having equity seemed a bit useless. I could not use that equity until I sold my home. I was wrong, though. I could get a home equity line of credit (HELOC).
I had associated a HELOC with a low-interest credit card. When I spoke with a bank representative, they gave me a similar analogy. He told me most people use a HELOC to remodel their homes. Why would I get into “credit card debt” to make my home look prettier? It was already nice enough.
Could I use my equity to build my wealth?
Yes, there was!
I decided to invest in high-dividend paying investments in the stock market.
Four ETFs paid about 10% yearly dividends. Even better, their dividends are considered Non-Dividend Distributions, which are non-taxable under current U.S. tax law. Any money…