All Forum Posts by: Bryan McCloskey

Scott Sewell, THAT was classic! :) Great headline to pull us in...but , more importantly, great message !

Eric, that's awesome! What a great feeling! I still remember the feeling of closing my first wholesale deal as well. It was almost like "wow, this DOES work!" It was vindication for sure. In reading your story above, it seems like you have a solid marketing plan with some systems in place...and that is important because it is a numbers game (a numbers game that you can improve with metrics...and it seems like you are doing that) Great stuff! Continued success my friend!

Hi @Kim Handelman,

I had a similar opportunity (REO) in front of me a few years ago. I found that by asking around to several banks, I found one that would lend 80% of ARV, and wrap the rehab loan into the process.

I had to jump through a few more hoops along the way, and prove out the opportunity with market/neighborhood info, but since I was new to the process(only a few years in...first big rehab opportunity), it was good to have an extra set of eyes confirming the opportunity that I saw for sure.

Terms were much more favorable than hard money.

Sounds like you are ready to call around to a few banks...I would encourage you to make sure you have some smaller local banks on the list too!

-Bryan

Matt,

I don't know if you are still following this conversation...but I have to admit...
your title was awesome...you can see that it CERTAINLY caught attention!
(That's your marketing skills at work, most likely :)

There is a LOT of personal philosophy being shared...
and a good amount of personal experience...
and the diversity among it reminds me how AWESOME Real Estate is.

There are SOOOOOOOOOOOOOO many different ways to work and enjoy this craft...
and so many ways to make money.

(I'm going to use an analogy in a moment...
and it reminds me WHY there are aisles and aisles of tools in Home Depot...
7 options of the same type of tool...7 brands and colors and fancy shiny boxes...
thats because each one has it's own unique attributes...
you may like one and I may like another...but they are both there for us to use! )
--And hey...if we overpay for the tool...maybe that's our fault, right?---

But I look at it this way...
Robert Kiyosaki made us (read "me")think differently...
and Dave Ramsay wants us to be more responsible (although I have issues with some of his financial preaching, I do appreciate his message of being responsible)

CK Hwang and ANISH TOLIA said it a few days ago...these concepts should not be mutually exclusive.
There are lessons and benefits to be taken from both.

Debt is a TOOL.
Tools can be used safely.
Tools can also be very dangerous.
(ie: talk to an Emergency Room nurse.
Hundreds of thousands of people get hurt every year with power tools.
People cut their fingers off with circular and table saws!
Why don't we tell people to never ever use a circular saw???
Probably because we know they can be used safely.)

And I feel the same applies to Debt as a Tool.

----My Personal Experience----
Matt, You asked for us to share...so here goes:

I've been hurt by Vacancy in the past. 

It was a few years back...one of my first deals.
I was leveraged on a property...
I bought it "right" and fixed it up under budget...
but then it SAT VACANT.
2 units...if I had just 1 unit occupied I could carry...both occupied I was +$1,000/mo!!

But it sat VACANT. For close to a year.

That hurt...especially since I had to service the loan along the way.

What I did was use my cash reserves to carry me until I unloaded it to eventually break even.

***I just hold my cash reserves differently.
I had my reserves in cash value inside life insurance...
so they work for me while they are sitting there...
and they still grow for me while I used them to carry the property.***


But when I reflect on this experience, this is what I ask myself:
"Would I still be holding that property if I had bought it all cash?"
I don't know...
I wouldn't have had to service the loan to the bank...
I may have decided to hold it longer...
But would that have been the best idea?...

The issue with that property was LOCATION LOCATION LOCATION.
Bad bad section of town.
So maybe I learned a bit about using the tool...
I recognized the value of having reserves even while I'm leveraged...
and I have a MUCH BETTER idea of how to build my portfolio now than I did back before this debacle!

And I have other, cash flowing properties, with debt on them,
but I also have healthy reserves that continue to grow while I am adding to them on a regular basis, preparing to acquire more!



To the group:
Excellent debates back and forth...
There are many many successful investors on here!
Keep it up!

Ahhh...Steve...strong opinion, and that's OK, you are entitled to it, but I would have to say you may not be looking at the entire picture and you may be missing it a bit.

I talk with folks about this all the time. I won't get too detailed here...there are plenty of places to go to get all the details...

But think about your statement where you said "they keep your money when you die?"
I assume you are referring to the fact that the insurance company pays out a death benefit upon your demise, but they don't pay out the death benefit PLUS your premiums, right???

Do you ask the same about term?...since upon your death, they only give you the death benefit and not the death benefit plus your premiums. I mean, if you are gonna kick the bucket, you should do it early in a life insurance contract...so you spend less for the death benefit, right!

But that is beside the point, since in a whole life policy, your death benefit will INCREASE over time, and ultimately still be in effect when a normal term policy would have ended, thereby giving you the option to keep it in force and continue to benefit from it (both the Cash Value & Death Benefit)...or take the Cash Value dollars back and walk away!

If I were to use a Real Estate analogy, I feel your statement above is the equivalent of saying "Hey, I paid my mortgage for 30 years, and now when I sell, why don't I get all the dollars I paid PLUS the market value of the house?" Seems weird to state it that way.

Bottom line is, when used correctly, you can leverage the dollars inside a life insurance policy for their benefits WHILE YOU ARE ALIVE as opposed to only when you die. There are tax benefits, guarantees, leverage components, and more flexibility than most folks realize.

Think about this...using a Whole Life Policy as a private banking tool is not for everybody...especially if you don't take the time to understand how it works...but there are folks who buy this stuff by the truckloads...they buy as much as they are legally allowed to buy. These folks are Banks and Big Corporations...do you think they know where to safely grow and leverage their capital???

To add some value...these videos may help on the buy term & invest difference side of the discussion.

https://www.youtube.com/watch?v=DOR_6Cf5uhI

https://www.youtube.com/watch?v=Xtg6Ug8p3Zc

Just sharing opinions...and looking to give Jason and the Group some insight,

Bry

I thought that may be the case....thanks for the info Dmitriy and Mark!

Lakeisha,

I am SOOOOOOOO happy that you asked that question BEFORE you handed your money over.   I, too, am in the process of finding a good project to lend to...and with what I've read and learned (a lot from the excellent comments above) it is all in line with being a smart business person and lender.   WE (the lenders) control the terms and need to be 100% certain we are comfortable with the risk.

I am making the transition to add private lending on real estate projects to my strategy and still looking for the right project locally here...and this thread was timely.  Thanks for starting it Lakeisha!

Mark or Serge,

I opened up a solo401k just last year...and I LOVE the flexibility!   I am curious though...I have yet to purchase a property in the 401k...but if I do...will a bank place a mortgage on it?   Or are there any considerations I should think about when purchasing and looking to re-fi and leverage the dollars into another project?   

I ask because I swear I heard or read recently that the process or ability to obtain a loan on a property held in a solo401k may be different than personally held investment properties or even LLC or business owned properties. I've been looking around BiggerPockets blog a bit...but didn't see anything about the topic. Any insight?

Thanks

Bry

Hey Jason...

Great question. Tom is spot on with his explanation. The "7702 plan" simply refers to the tax treatment of life insurance cash values. In mainstream media, whole life insurance gets a bad rap...but when astute investors learn more about it, and recognize the benefits attributed to their dollars housed in the cash value of life insurance, they tend to perk up (kinda sounds like what happened to you at the meeting recently!)

For full disclosure...I personally use Whole Life Insurance as a house for most of my personal and investing capital...and I have used the loan privilege for both debt refinance and real estate investing purposes. Day to day, I run a successful business teaching folks how to properly apply these principles to build and use their own policy based on their investing style.

I'd agree with Tom that the guys who are talking about it certainly have wrapped their head around it...and can shed some more light on it for you.

I'd want to add that these policies are WAY more flexible that most folks think. When built correctly (incorrectly built policies have given the whole product line an unnecessary bad name) they are flexible to absorb more capital over time (like when your tenant pays rent or your investment cash flows back to you), they are flexible to require less in down years, and after a few years of moving dollars toward them, they can be "turned off" either temporarily or permanently. I also wanted to comment on your first post and add that, in a properly designed policy, you will CERTAINLY have access to a LARGE MAJORITY of your dollars in year 1....and in many cases, you can overcome the insurance costs within a few short years.

There is a cost to building an insurance policy to strategically use and house your dollars, but that cost can be well worth it when looked at as a tool to effectively build your wealth, and it can be overcome rather quickly!

If you wanted to learn more, just ask...
or, even better...check out some of the resources we have online:

Video about it:
https://www.youtube.com/watch?v=HUihEMYCHFA

A Website for more info:
http://beyourbank.com/

Podcast about it with the Real Estate Guy Radio show:
http://media.blubrry.com/wealthstandard/www.podtra...