All Forum Posts by: Pete M.

Quote from @Agustin Conti:

Quote from @Pete M.:

Just to confirm, the HELOC would be against your primary and used to improve the same property--right? If so, that interest could also be tax-deductible. That's the one scenario for HELOC interest deductibility that the TCJA left in!

 Yes I just realize this..I need to "crunch" the numbers to have an idea of how much I would pay every month..if I take..like $50k every three months 3 times..I could not find an heloc calculator that allows me to calculate precise monthly payments..Any ideas?

Your payment amount will depend on your balance and the interest rate; additionally, whether it's interest-only or amortized (meaning princpal + interest in each payment).  The answers to those will depend on the HELOC terms.  HELOC interest rates are typically variable, meaning the interest rate changes periodically (often monthly), which adds some unpredictability.

If we assume a $150k balance, though, at 9% interest rate with interest-only payments, then the monthly payment would work out to ($150k balance * 9%) divided by 12 (months) = $1,125 per month as interest.

Quote from @V.G Jason:

Quote from @Pete M.:

Quote from @V.G Jason:

This all depends on your income, your spending, and your dependents. This can go so many ways.

The last people you want to talk to is a normal, average financial advisor. And anyone that sells you life insurance. Kick their *** to the curb. 

Agreed on all except the LI.  A purpose-built LI policy can do so much and still enable RE investing--when, like you noted, it suits the needs.  Off-the-shelf policy that focuses exclusively on death benefit isn't it, and I see those way too often.

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

Not at all and history shows elsewise, but I don't see this going anywhere than yet another pointless internet argument--so good luck!

Quote from @V.G Jason:

This all depends on your income, your spending, and your dependents. This can go so many ways.

The last people you want to talk to is a normal, average financial advisor. And anyone that sells you life insurance. Kick their *** to the curb. 

Agreed on all except the LI.  A purpose-built LI policy can do so much and still enable RE investing--when, like you noted, it suits the needs.  Off-the-shelf policy that focuses exclusively on death benefit isn't it, and I see those way too often.

Everyone's goals are different, so the vehicles and path to get there will also be different.

I use cash value-focused permanent life insurance, taxable investment accounts, and lines of leverage to purchase real estate directly, syndications, and funds that pay monthly (mostly real estate, but some not).  Gets deeper from there, but that's the high-level.

My goals included being work-optional well before the traditional retirement ages tied to retirement accounts, so therefore the places I put my money needed to afford more flexibility.  Happy to say I just hit work-optional recently!

I left tech in 2021 after 15 years to join my financial advisor's team.  Happy to share my candid thoughts and experiences if you're ever interested, @Zac Kucharek!

Just to confirm, the HELOC would be against your primary and used to improve the same property--right? If so, that interest could also be tax-deductible. That's the one scenario for HELOC interest deductibility that the TCJA left in!

Quote from @Sam Sciascia:

Quote from @Dwight Kimball:

@Tom Jensen the problem is that the cash value is not really yours

Why would you pay interest to use your own money.

The real problem comes when you borrow $ from your whole life Policy it reduces your death benefit by the amount borrowed.

It is supposed to be your $ so why does it decrease the death benefit.

You have to pay interest to use your own money?

Would you ever invest money with your auto insurance. Or would you go to the bank and pay them interest to use your money that is in the account?

I'm sure someone else has a better idea.

I hope that helps Tom.

Dwight Kimball

You are not borrowing your "Own Money" you are borrowing from the insurance company's general account fund. The insurance company puts a lien against your cash value for the amount you've borrowed and you agree to pay them interest. Just like a heloc.  

You're correct, with the exception that the interest on a HELOC is just pure profit for the bank, and not tax deductible under current law (unless used for improving the same property).  Interest from a policy loan can be tax-deductible if used for other purposes (always talk to your tax professional) and mutual insurance carriers return profits to policyholders through the dividend.

I did not contest, as I had missed the window and honestly it's a tough argument since the valuation was very low vs market if we're being honest.  Some places have caps on the % increase per year on property taxes (thinking about Oklahoma City as an example), but KC does not.

Also, and I know hindsight is 20/20, but never trust the numbers on the listing.  The county records should reflect the upcoming valuation for the next fiscal year and are public record in virtually all places.  Same principle applies to the seller's expenses and insurance--they're pointless for your underwriting.

There were several posts about this previously, and the previous window to contest has long-since closed.  Saw one of my properties go up 4x; it was definitely low to start, but that's a painful shock nonetheless.  I believe Andrew Syrios has posted previously on the topic, and I think I recall a lawsuit having been filed over it.

Quote from @Ned Carey:

@Pete M. Is there a scenario where interest earned would be subject to UBIT?

 Just re-read your post, I had missed the part about it being a loan from the owner of the self-directed account and not an equity position!  That shouldn't be subject to UBIT then.