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Letter from one of my subscribers

Posted by John Reed on

Here is a letter from one of the subscribers to my newsletter:

Dear Mr. Reed,

Congratulations on your decision to retire from the newsletter business. It is with great reservation I am writing what will be my last check to you for your valuable monthly insight on real-estate matters.

I would like to personally thank you fro your guidance in my career, I have looked froward each month for the arrival of your collection of your valuable thoughts.

I will continue to recommend your fabulous books in the future to novices and professionals alike. The title that began my journey with your publications was purchased at a book store 25 years or more ago helped me understand the real estate business was Aggressive Tax Avoidance for Real Estate Investors. My accountant suggested it and I was hooked on your style and knowledge. I purchased many other titles over the years including your newsletter.

Aggressive Tax Avoidance for Real Estate Investors, 19th edition book

One nugget that has really stayed with me over the years Net Annual Constant. I have never met anyone in my area including bankers who have even heard of this term or concept.

Thank you again for the service you have provided over the years.

Best to you and your family,


Russell R. Livingston

The annual constant is the mortgage payment divided by the loan balance. This goes up every month in a long-term, fixed-rate, self-amortizing mortgage, which is the most common type of mortgage. Since only the interest portion of it is deductible, the rise in this reduces after tax cash flow geometrically over time.

Refinancing knocks the mortgage payment back down as a percentage of the loan amount. Exchanging the property tax free and acquiring another also has the effect of keeping your loan-to-value ratio high (leverage which multiplies return on equity) and your after-tax cash flow higher because almost all of the mortgage payment is deductible.

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  • This is technically accurate for a rate/term refinance if the new loan is on a sufficiently long amortization schedule, but important to remember that you’re only able to write off the extra interest because you’ve created extra interest to pay.

    That being said, great content. The article clarified this dynamic for me.

    Shafi on

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