All Forum Posts by: Account Closed

The method I explained is about paying off a mortgage so that you have more equity to access a bigger HELOC. Of course you can just take what you have and put it on another property, the choice is up to you. What I'm proposing is an accelerated strategy where you pay off one property then go get X more. Then repeat the payoff process and now you have more free and clear properties to get a HELOC on then go out and get XX more properties, essentially a snowball effect to the point you have as many free and clear properties as you wish. We have investors using this strategy, one of which has 60+ properties now in just 9 years, and he never has to get a mortgage or worry about the property value going upside down. Its definitely an advanced strategy that take some time to fully understand but once you do you won't want to go any other way...in my opinion at least.

I posted this on another thread but seem appropriate to post here as well.

You could leverage your HELOC to accelerate payment on your house, then tap into the equity to purchase more investment properties. This is an example of what to do.

Take out a simple interest home equity line at 4.4% (keep in mind that HELOCs usually have a variable rate)

Lets say that's $40,000 and you pay $20,000 of that toward your mortgage. (Accelerating payoff of amortized debt)

Now setup and use your HELOC as your bank account and deposit all of your income into your HELOC. Since you are paying simple daily interest, deposit your income at the beginning of the month, and pay your expenses at the end of the month therefore keeping the balance as low as possible. If you can have a lower balance for a majority of the month, you'll save a great deal on interest.

Allow any surplus to remain in the account to pay down your HELOC balance back to zero. This won't work if you're living paycheck to paycheck. You need some surplus at the end of every month to pay down the principle.

When you reach a zero balance, pay another 20k from your line to the mortgage. Repeat this chunking process until your mortgage is paid off.

When applying this strategy, most people can pay off their 30 year mortgage in 6 - 10 years, even faster in some cases just depending on how long you've had the mortgage when you start.

I work with some banks that do 30 year fixed, first position Lines - allowing you to pay off the mortgage and with the line and have the line in first position.

There is obviously more piece to this so this is the strategy in a nutshell. Feel free to reach out if you'd like more info to learn how to do this.

You could leverage your HELOC to accelerate payment on your house, then tap into the equity to purchase more investment properties. This is an example of what to do.

Take out a simple interest home equity line at 4.4% (keep in mind that HELOCs usually have a variable rate)

Lets say that's $40,000 and you pay $20,000 of that toward your mortgage. (Accelerating payoff of amortized debt)

Now setup and use your HELOC as your bank account and deposit all of your income into your HELOC. Since you are paying simple daily interest, deposit your income at the beginning of the month, and pay your expenses at the end of the month therefore keeping the balance as low as possible. If you can have a lower balance for a majority of the month, you'll save a great deal on interest.

Allow any surplus to remain in the account to pay down your HELOC balance back to zero. This won't work if you're living paycheck to paycheck. You need some surplus at the end of every month to pay down the principle.

When you reach a zero balance, pay another 20k from your line to the mortgage. Repeat this chunking process until your mortgage is paid off.

When applying this strategy, most people can pay off their 30 year mortgage in 6 - 10 years, even faster in some cases just depending on how long you've had the mortgage when you start.

I work with some banks that do 30 year fixed, first position Lines - allowing you to pay off the mortgage and with the line and have the line in first position.

There is obviously more piece to this so this is the strategy in a nutshell. Feel free to reach out if you'd like more info to learn how to do this.

@Lynda Duke did you try find the seller? If so, what were your results?

@Jeremy Tillotson Thanks! Thats what I'll be doing, most likely. I'm not ruling anyone out at this point. I'm letting them all fill out the app and it will be a comparison of who is better qualified and/or who took action first. Of course who is willing to pay more is a big qualifying factor. 

 Of, course I understand there is more to a deal than earnest money. The money didn't go to my bank account. It's being held in an escrow and will be given back if they don't qualify. I'm asking they put it up to show they are serious. I don't want to spend my time and money screening someone if they aren't serious. I've had that happen a couple times on this house, and it's frustrating. I make sure they qualify before I sign agreements with anyone.

That being said, I got in touch with a few other fellow investors, and got some good advice.  It's pretty much along the lines of what @Elizabeth Colegrove said. I wanted to know if I was on the hook for anything, and how to let the other know they weren't getting the place.  

I have searched the forums, and it appears I am the only one who has asked this question. Probably not, but I tried all the keywords I could think of, and it didn't show up...and didn't want to have to skim through over 1,700 posts!

Anyhow, I just showed a property this Saturday and one of the potential buyers said they wanted the place and wanted to know if they could put earnest money down to hold it. Since it was the only offer I'd been given in months, I said sure, if they could put $2,000 earnest money in escrow I'd hold off advertising and showing while they ran their application through my RMLO. Well, 96 hours later they finally made it to the bank to deposit the earnest money, but still haven't even filled out the app. I check in with them daily to try and keep on top of it, but I don't want to have to hold their hand all the way to the closing table.

So here's the twist, someone that had seen the property a week prior, just called today and said they wanted the place. I informed him of the situation, but he said he is willing to put down more money, plus he makes better income. Of course, I would still put him through the same screening process with the RMLO to make sure; but before I have him pay the application fee and go through the process I want to make sure I can do this without getting into some sort of trouble. I didn't make any promises or sign anything with the first guy, other than I would hold off advertising and showing, but this guy looked at it a week prior to them. And he is willing to put down $10K more, pay more monthly, and structure a shorter term to payoff quicker (i'm selling with seller financing).

Has anyone encountered this and how did you handle it?

I have a deal that I would like to get advice on how to structure and present to a possible private money lender. Maybe I can even find one here. I am currently in a sandwich lease. I have tenant buyers in on a three year lease option at an agreed purchase price of $160,000 with $15,000 down, plus an additional (possible) $3,600 off for paying no later than the 25th of every month. Ideally what I would like to do with this deal is find someone that would lend me the $120,000 I need to purchase the place. I would split rent and back end profit 50/50. I receive $1000 a month and am due another $21,400 if/when the tenants exercise the option. The current estimate market value is around $175,000 which is good security for the $120,000 investment (68% of ARV). My thought is that if the tenants don't exercise the option, I can find new tenant buyers and sell at a higher purchase price and higher monthly rent.

I think the monthly is too slim to try and go after hard money. I'm not sure what they actually charge, but I've heard its a lot and can eat up profits quick so they are only ideal for short-term needs. Splitting the monthly rent would mean a %5 ROI on $120,000. I would have to pay taxes and insurance ($137 a month) out of my half which would leave me with $363 positive cashflow.

A traditional mortgage is not an option as I had a student loan get called due while I was still in school that I wasn't aware of and posted negatively on my credit. Long story, but I was given  a "too bad, so sad" answer and that I would have to wait it out.