Some of my clients have asked the question of using their liquid cash to build spec houses. They tell me they can earn about 6% on their investment. Ok, this sounds good, but let's take a hard look at the facts, and the truth behind using this financial strategy: • You must first purchase the land for your spec house to be built upon. • You will have to pay taxes on the income you receive. • You will inflation affect the purchasing power of your 6% return in the future? • You now become a collection agency, and even though you hold title to the real estate, you still have the stress of dealing with the mortgage. • You have given up control, use, and liquidity of your cash. • This financial strategy will add assets to your estate that could create additional taxes in the future. • Your notes receivable is subject to outside creditors (Nursing Homes). • There is a much wiser financial strategy, and it is using Privatized Family Banking (PFB). • You should earn between 4 to 6% on your money Tax-Free, and you will have liquidity and access. • You can use your PFB to create wealth, or an even better plan is Loan Base Private Split Dollar Plan. • You can create a Tax stream of income. • You will have your money protected from outside creditors. • You will be able to leverage your dollars to create a Tax-free asset for your heirs. • You can use this financial strategy for funding your children's or grandchildren's college education. • The government recommends the 529 Plan. However, with their plan, you have almost no liquidity, and 10% most cases, you have market
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