All Forum Posts by: Account Closed

@Eric Jones I know that the larger benefits are from pre paying the note not the HELOC as checking. I used it. If you have a much larger income then debt then it works. The larger the income and more the bills the better it works. I also know personally that you do get small savings by leveraging daily balances. Having all my bills go on a credit card and paying them off last day in full. then collecting the bonus points on the card. I really do it just because I enjoy the bonus points. Saving for Hawaii next year in the spring. I am sure the exercise will reveal that you have very minuscule gains using the HELOC as checking. However you are not using a daily balance and that very's person to person. someone could leverage 20,000 in bills every month and keep it against there debt vs giving it to banks/retail/ or other fine establishments and paying cash. As your small numbers would suggest the savings if any is very small. However if you run larger numbers and factor in daily balance and the fact that they get to hold onto all of their income and not pay any of there bills until the last day can make a difference. For the average JOE it is chump change. For warren buffet its 1,000's per day. The real exercise is using this HELOC the right way and that's not against your primary home and using it to purchase cash flowing real estate decreasing your daily balance owed on the HELOC and then repeating the buying when savings is saved and HELOC is at or approaching zero. If you look at it that way you will see why the book is right by not having a checking and using the HELOC for the daily balance leverage buy down however idiotic by telling folks to get rid of their savings. It makes sense if you are buying real estate with it to use it as a checking as otherwise your money just sits there not doing anything for you. why not leverage all your checking for the entire month against your HELOC buying down daily interest? I'm on the same page as you and feel as there are far better/safer ways to pay off your house and the HELOC should be used for both acquiring real estate and a checking account to fully leverage your monthly balance paying off the debt as fast as possible and repeating. If you get 60$ a month by having your money sit in the HELOC vs checking why not. Plus a free vacation to Hawaii every 3 years in bonus points is a huge bonus. Paying off my incredible low rate on my primary and taking away the tax advantage would not be in my best interest.

interest is acquired daily. once you understand that concept it is easy to understand how this can work to your advantage, but there is a breaking point with rates. best of luck

@Laura Costello Most lenders will not allow you to have a HELOC on your investment property. However I would do a cash out refi either way. Get a HELOC on your primary home if you are looking for a HELOC. I also would want to lock in the 30 year fixed of 4% or so on that investment property. You can use the HELOC to prepay the loan if you are trying to pay it off early. If you are trying to use the HELOC to full advantage read the book "how to own your home years sooner without making any extra payments" really opened my way of thinking. However My thought process is different then the books. I use this stragedy to buy other homes that cash flow using the HELOC. That is great news regarding your BRRR and I can 't wait to complete one myself. best of luck out there

Right now in San Diego we have 10 buyers entry level buyers for every 1 seller, homes are selling in 2 weeks or less if priced right depending on price range. Keep an eye on affordability. If they raise the rates we will see a fall and I'm pretty sure they know that.  About 17% of San Diegans could afford a home in 2006 and about 24% right now 65% or so during the crash.  So we have some room for growth especially with this demand so high. Job growth and population growth all rising in SD. New Home Construction growing. 1.5 months of inventory on market. (Sellers Market) We still have cash investors representing 20% of all transactions but slowly declining. All pointing to at least 1 more year of housing growth.   Keep an eye on affordability and inventory if you do buy this year make sure you plan to hold if for a while or do a flip. As affordability is becoming a question for many. I am not familiar with the SF market but would assume if you bought for a 6 month flip you'd be fine.  Even better off if you held onto it cash flowing for 25 years. best of luck

@Eric Jones You are not including the fact that your payment has not changed and now more of the payment is going to principal not interest or the bank. Here is my exact example with the amortization schedule below on my home current home starting the mortgage off today and immediately placing 10k against it using the HELOC. I currently owe $239,669.34 after my first payment 1,180.66 on my home aug 2016. $330.66 going to principal $850.00 going to the bank or interest. I take 10,000 out of my HELOC and place it against the primary note now jumping down to january 2019's payment owing 229,669.34 on the 1st and 10,000 on the HELOC and not knocking off over 2 years of payments and almost 25k in interest payments. Now my payment is the same $1,180.66 which would come out of my new " Checking/HELOC" account as normal and on time but 366.36 now going to principal and 815.59 going to the bank as interest a difference of 34.41 in interest savings, $35.7 more monthly going to principal if it is a rental do you see how this can leverage rent further? Also I have a fixed rate 1st with a lump sum for mortgage 1 and a HELOC adjustable rate and daily account balances. now calculate the payment on the HELOC with worse case scenario of 10k against it. should be less as this is now your checking account. interest rate I have is 3.99 so the formula is ( .0399/365 days in a year) X (ammount owed) x 30 days in a month ( interest is acquired daily including on your primary note if you understand this concept then you understand how larger sums of money can save big.) So the longer you hold onto your income from work and the longer you wait to pay your bills you use your money to leverage your daily interest rate balance. Bigger Checks/Bigger bills = Bigger buy down of interest and bigger savings/leverage. The more you make the more your savings should be just like a checking you need a separate savings you try and place 30% monthly income into. For the average Joe this is idiotic Idea as it is just as easy for 20 bucks a year to save the money and place it against his note at the end of the year. The breaking point rises quickly. The real savings is in the 25k I don't have to pay in interest for spending the large sum against the note originally. For someone making large amounts of money if they execute this properly they can fully leverage their net worth. This is not for your average JOE. The average JOE looking pay off their house can do so in better ways with less risk. HELOC should be used for repairs on the primary home or to buy cash flowing high demand area rental income real estate. The book fails to mention yes you use this HELOC as a checking but you also need savings account, and you never want to pay off your primary.

@Joe Au I think you may need to read some books on it and see it this fits what you are trying to do? It may just make more sense to save the 10 k then use it at the end of the year. This is much safer and more practical. Yes you can use the HELOC to pay the HELOC by putting money into checking and back into HELOC. I wouldn't pay off your primary if I were you and rather pay off your rentals if that is what you are trying to do is pay off a house however I would challenge you to find cash flowing rental income in a high demand area to increase your net worth and cash flow. best of luck

@Eric Jones @David Dachtera I can tell you from personal experience it does work fantastically on your primary home, But the argument to buy other property with higher return is valid. This kind of changed my thinking David thank you.  I may need to be paying off rentals in high market times such as these when it is tough to find a cash flowing property as more and more rental income will in turn be going towards principal and not the bank. Thanks David

Although you are making minimum payments and switching money around. In hind site you are putting every penny that would normally be coming in and out of your checking account buying down the HELOC

@Account Closed As Warren Buffett once said " The eighth wonder of the world is compounding interest and if you understand it, you will be very wealthy." talking about long term benefits of dividend stocks.

It does nothing but teach you how to save money @ Bob Bowling as the money is coming out of the equity in your home and is completely worth the grand price of 600.00 in savings yearly in interest if you had just saved the 10k and then placed it against the note at the end of the year. Which I guess adds up next year. Yes if you just save your money every year and drop the entire savings against your home you will pay it off quickly. I think people can get suckered in here and not have any savings if the bank calls the note or they lose their jobs. which could prove drastic and also open the wrong ones and over leveraging. Do you think paying off the note on your primary is a good thing? Or invest in cash flowing, high demand area good rentals instead of paying off our primary notes? Then paying off our rentals before our primaries? The benefits are basically instant access to your equity to buy anything that makes sense to increase cash flow from day 1 and net worth. If someone making large amounts of money in real estate income/deposits used this method I am sure that they could save 10's of thousands yearly just by using it as a checking account. But actual savings from paying off my HELOC is about 600.00 a year. Haven't ran this years numbers though should be slightly higher as the more you make in real estate income/deposits the bigger impact. Placing 10k against my note 1 time saved me about 25k in interest over the life of the loan and 2 years or so of payments if I remember correctly as it was years ago. But take a look what it would do on your amortization schedule by doing it once on your property. should save you years if you refinanced recently. The more you owe the bigger the impact.

The way to long term wealth is through buy and hold cash flowing real estate in good desired neighborhoods! If you can hold onto the property and make it cash flow then do it. Make sure you run the numbers correctly as the podcasts teach. Open a separate bank account for the house and don't touch the money as if it's not even there including the cash flow. There is only one reason to sell and that is you found something with bigger/better cash flow/ equity gain opportunity. I personally go for mostly cash flow in multi family.  If you are green I would read every book you can that is in the top 25 of google regarding real estate and even every bigger pockets book there is once you are able to form a knowledgeable opinion and decide what you want to accomplish then I would act. One persons real estate stragedy is not a one size fits all.