How can I use my fathers equity

Question

I’m new to this community and any help would greatly appreciated.

So I have a question my father has a church/building that is worth over a million dollars and haven't used the equity on the building and the banks are offering him money so basically he has access to more money I need your expertise on how we can capitalize on this opportunity.

Ps. He also has a home health care agency that he runs out of this building and the business has generated a million dollars last year. How can we use this situation to our advantage.

Beth Johnson · Answer

@Michelet Polection

Have you considered getting a Line of Credit on the property and then lending it out for passive income? I got a HELOC on an investment property last year in 1st position with a variable, interest only rate. This allows me to arbitrage the HELOC into private money loans to other real estate investors where I could make a yield spread on the interest. My short term loans were typically in the 10.5-12% range so my yield is roughly 5-6% depending on prime. (My line is prime + 0.75).

If you aren't sure where to start in learning about becoming the bank, I just published a book with BiggerPockets last summer called Lend to Live: Earn Hassle-free Passive Income in Real Estate with Private Money Lending. You can check it out here:

https://store.biggerpockets.com/products/lend-to-live

Garrett Crosby · Answer

Hi @Michelet Polection - welcome to the community! :)

One thing I would want clarification on which will make a big difference: you mentioned it’s a CHURCH/building. If it’s a church, you will need to get a little creative because often times places of worship have different laws that prohibit funds being allocated for assets outside of the organization. Talk to a really good CPA and a commercial lender to get an idea of what you can do or how you can get creative.

I had a friend make a similar mistake assuming a church is just commercial real estate and they ended up getting in a lot of trouble with the IRS.

State laws can also dictate different options available for you to… so I would 100% connect with local experts and unpack the details so that you set yourself up for success! Best of luck! :)

Michelet Polection · Answer

Hey, thanks all the advice are awesome. I appreciate everyone reaching out. I have a lot of thinking to do and some professionals to talk to.

Scott Mac · Answer

Hi Michelet,

You and your Father really have the Tiger by Tail--you are awfully fortunate!

If it were mine, I'd ignore the equity in the church as it's the cash cow, and I would not want to upset it's cash flow with a bank repayment or risk foreclosure and losing it.

I would also stop spending the cash that comes in, and begin saving it.

How long would it take you to save one-million dollars cash (the equity amount in the building)...a year or so?

Then you REALLY have one-million in cash that belongs to you--to risk on investing, without the risk of losing the cash cow.

I assume you live well, and 10 million a year won't make that much difference in your life than 1 million a year...You can only spend so much and still live a splendid lifestyle.

But if something happens and you lose that cash cow to bank foreclosure, sleeping on a park bench could be a reality.

Just my 2 cents.

https://www.youtube.com/watch?v=h0GLVc4f02k

How can I use my fathers equity

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