What if Your House Paid Dividends?

Let’s do a thought experiment. What if your primary residence paid you dividends at the end of every year? You would get half of the value increase in the market value.

For example, if you start this year at a home value of $200,000 and end the year at $220,000, you would get $10,000 in dividends.

Capital gains vs. dividends. This brings up the age-old discussion of capital gains versus dividends. In this scenario, you have two distinct options. 

1. You can take your dividends every year. However, in time, your home equity wouldn’t be as high.
2. You can keep your home equity in the home, allowing you to build a giant nest egg inside the value of your home.

Which route sounds more appealing to you? The bigger question first would be how would you spend your dividends?

Real Estate is IDEAL: Income

Can you find a better investment? Most people couldn’t find a better investment with their $10,000, so they’d prefer to leave the money in the home. I could find a lot to invest in with my $10,000.

1. $1,000 to an index fund portfolio in my Roth IRA.
2. $2,000 to a dividend growth portfolio on STASH
3. $3,000 to an income portfolio on M1 Finance
4. $2,000 to rental account on Fundrise
5. $2,000 towards starting a YouTube channel and blog

Advantages of taking dividends. So what are the benefits of taking your dividends out every year? The main advantage is diversifying your passive income and investments away from your primary residence.

What if you do everything right with your primary residence over a 30-year timeframe? You bought it for $200,000 in 1978. In 30 years, you pay off your home, and they appraise the house for $600,000.

Your First Investment: Investment Property or Dream House?

You have $600,000 in home equity. Life was good until the Great Recession hit in 2008. Now, your house value is $300,000. You could wait until 2021 when housing prices recover and eclipse 2007 prices. 

Without diversifying your portfolio, you are at the mercy of the market. You don’t know how to make a strong portfolio that can withstand market downturns. Leaving your home as your single biggest asset has proven to be a costly mistake.

Your house does pay dividends! This may have been a thought experiment, but your home does pay dividends—if you know how to find them.

You can tap into your home equity at will. Let’s say your home equity reaches $200,000. You can conduct a cash-out refinance and withdraw a large sum of cash, let’s say $120,000.

The Average Millionaire has 7 Streams of Income

Even better, since this is debt, you don’t have to pay any taxes on this withdrawal. Your mortgage may increase based on current interest rates, but you can solve this issue. There are many ways to pay for this mortgage increase.

I share many ideas in my book “21 Passive Income Ideas.”  The more important question is how to invest the $120,000. Man-O-man, would I love to invest this cash.

You could buy a house in a small town and start an empire in another state. You can buy an RV, mobile home, or storage unit to rent to others. 

Too many possibilities. There are too many ways to invest this money and even reach an infinite return. If you don’t know how to invest $100,000+, you will have to do a lot of reading. This scenario is basically what I write about every day. 

New Year’s Passive Income Resolution

Conclusion. The most important part of life is learning to invest—outside of relationships. The best way to have a great relationship is to have good finances. Money buys you freedom of time, movement, and location. 

After the pandemic, you are probably sitting on a nice nest egg in home equity. Don’t TAP it until you become a bonafide investor. Learn how to invest in dividends, real estate, crypto, royalties, and automated business. I recommend my book “Don’t Gamble with Retirement 5 (pdf)” as a great starting point. 

I’ll keep this article short because I want you to focus on the concept of your home paying dividends. If you learn to invest, you can leverage your home equity to diversify your net worth and portfolio away from your home. This is a big deal.

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing