Using HELOC to become a HML

[Jonathan Soto]

So I have quite a bit of equity in my home and was looking to get some information on becoming a HML. I am located in Miami and would like to mainly work with flippers using six month loans. Any information would be greatly appreciated as Im not sure exactly what would be the best course of action. My goal is to generate some passive income.

[Chris Seveney]

@Jonathan Soto

Strongly recommend against this unless you can afford the assumption of losing the investment

But here is where most go wrong. They do a private loan at 12% and are paying 7% on a HELOC

The money you make in interest is taxed at ordinary income. So let’s say you are in the 24% bracket and 6% state tax. That 12% gross after tax is now 8.4% - so you are making 1.4% or $1400 per $100k for that risk?

Hard pass for me.

(My HELOC is at 3.5% and I won't consider it as not worth risk - I don't leverage my home for investments unless it's buy all cash and then refinance to get that $ back)