Real Estate vs FDIC Insurance: Which One is Really Safer?

Piggy Bank House

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Why the Rich Stash Their Money in Real Estate, Not Big Banks

“The bank is the safest place for your money.” Oh really? I have two words for you: real estate.

If you have your money stashed in a savings account earning .01% to 1% in interest, you’re going to lose money most years. Why? Well, because inflation hovers around 1%. In the last 5 years, inflation has gotten as high as 3.87% (in September 2011) and as low as -0.03% (February 2015) according to InflationData.com

If inflation is outpacing the interest you are accumulating on your money, you are losing money! Yes, you may have a higher number amount in your bank account at the end of the year, but that money is worth less than it was when you deposited it.  So you tell me: Is the bank the safest place for your hard-earned money?

The Old FDIC Excuse

In the U.S., the government makes a promise to insure bank deposits up to $500,000 through the Federal Deposit Insurance Corporation (FDIC). With our money insured and safely hidden away in a money-losing, interest-bearing account, most of us are content to keep our money in a traditional savings account because even though we know we aren’t making any money, we like having that FDIC assurance.

FDIC insurance is contingent upon you leaving your money in the bank’s control. You agree to allow your bank to use your hard earned money to trade, barter, and loan out to the government, companies and private citizens. The bank loans money to the government by buying government bonds that have coupon rates of three to five percent interest. Sometimes they buy foreign government bonds that pay as high as eight percent in interest. If the bank is collecting eight percent and paying you only .25 percent, they make 32 times more than what they are paying you for the use of YOUR money. Imagine how much the bank makes when they loan your money to credit card holders at 25 percent!

If you think this seems unfair, it may be time for you to consider a better option.

Mortgage Instrument > FDIC Insurance

(A mortgage instrument is greater than FDIC insurance)

Well, let me quickly burst your bubble: A mortgage instrument is better than FDIC insurance. Anytime you control a mortgage instrument, you can control the amount of money you make on your investments. You acquire mortgage instruments by buying and reselling properties. The easiest way to do this is to buy a property at 40 to 60 cents on the dollar and resell the property for the full market value plus interest.

Let’s say you have $100,000 in your money market account and the bank is paying you 0.25 percent on that money. If you keep your $100,000 in the bank for one year, you will have $100,250 in your account at the end of the year (minus any bank fees). On the other hand, if you use $40,000 of that money to buy a property at a steep discount then resell it for $70,000, you allow a buyer to purchase the house directly from you with an affordable down payment and monthly payments at 10 percent for 15 years.

At 10 percent, you earn 40 times more than the bank agreed to pay you on your so-called FDIC insured money market account. If you agree to carry a note secured by a mortgage for fifteen years, your monthly payment will be:

$70,000 X 10% = $7,000 per year, divided by 12 = $583 per month for fifteen years

At the end of 15 years, you would have collected $105,000 from your original $50,000 investment

Now compare this to your return from a $50,000 left in your so called FDIC  “INSURED” money market account:

 $50,000 X 0.25 % = $125 per year income.

After fifteen years, you will have $51,875 in your bank account

Compare that to $105,000 to an investment that you control.

The questions that prompted me to write this story is the idea that millions of Americans are under-earning to their own detriment by buying into this FDIC insurance scam that keeps retirees poor and the middle class struggling. Bankers would have you believe the only safe investment is to leave your money in the bank. That’s just not true. The safest investment is the one that helps you protect your financial future.

For you retirees out there who want to learn how to leverage your money the same way banks do and earn 100X what the banks are paying in interest you can sign up for my free Double Your Money webinar.

Originally published at TheMagicofRealEstate.info

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