El Paso, Tx new investor

[Sharika L.]

Hello all, I have been a BP for 3 months actively listening to podcast (started from podcast 1) to posting a few questions, but this is my first time introducing myself. My name is Sharika and my husband Jason (who just joined BP yesterday) have decided to fully commit to real estate investing! Being in the military we already had 3 properties in 3 different states and knew that real estate would provide us with passive income, but it wasn't until I went to a 3 day Fortune builder conference that got me fired up! I actually had just heard of BP and went to the forums talking about gurus and mostly because of my husband we didn't pay the big money for education. However, my husband who didn't attend the conference was soon on board with my motivation to get serious about real estate especially since he is coming up on retirement. So since March we have added a 5 unit house and a duplex to our portfolio using or Heloc and PLOC. Our goal is to get buy and hold properties to replace our current paychecks and don't flips to pay off the loans. This is not a get rich quick job but the sooner we can achieve our goal and establish systems the sooner we can move our family overseas! I love to network and not reinvent the wheel. I love to share things I have learned and be transparent with information. BP has been a fantastic resource with the books, podcast, blogs, and forums(I use them all). I do hope I can meet partners, lenders, and get some properties on this site as well😏

[Jason Chambers]

@Dana Schreiber it took me a while to wrap my head around it too. No books or blogs. Just networking with people that do this with their properties. It's actually quite simple. It's the difference between simple and compound interest. We'll use my home as an example. Our mortgage was $3200 a month. Of that, more than $1700 of it was going towards interest. That was at a 3.75% interest rate. Looking at real numbers, 3.75% interest is actually more like 80% interest after 30 years and is front loaded (WHAT A SCAM!) We got a HELOC at 85% LTV and our home appraised for a bit over $700,000 which left us with a $600,000 HELOC. We had a bit over 25% equity in the home (we owed about $530,000). With our introductory, simple interest rate of 1.75% for two years, that left us with a $700 a month, interest only payment. We paid off the mortgage and told Bank of America to take a hike. We now use the HELOC like our checking account and deposit all of our income into it. Having to pay exponentially less interest and depositing all our income into the HELOC allows us to attack principal in large chunks. At this rate we can have the remaining balance paid off in 5-7 years. Remember also that as you pay down your line you still have access to it. So we've been using the available balance to finance some buy and hold properties that are bringing in good cash flows.

I've been asked, "well if it's that easy, why doesn't everyone do it". That's a reasonable question. The simple answer is the numbers have to be right. There needs to be enough equity and monthly cash flow (whether from real estate or from your full time job) to qualify for this type of financing. And not every bank offers fixed rates. We did this with Bank of Hawaii. We initially used a personal line of credit to pay down enough principal for our numbers to work for the HELOC. Keep in mind that even the worst variable rate HELOC beats the best rates on a mortgage (simple vs compound interest). Compound interest is a killer!

Hawaii is a high dollar market but the idea is that same anywhere. Reduce or eliminate the compound interest or the amount of time you have to pay it and attack principal in large chunks.