All Forum Posts by: Eric Schultz

@Scott Goulet

If you can cash out refi and get your original down payment back (and maybe any initial rehab costs) then you are establishing an infinite return on that property. Something to consider.

Something to consider. HELOCs are based on a variable rate linked to prime rate, which is forecasted to go up this year.

I recently did a cash out refi on a couple properties where the return on equity was less than 5%. I'm deploying the cash out funds into a couple deals that should achieve 15-20% IRR and hopefully a 1.7x - 2x multiple in 5 years. Much better use of those funds! The break even period on closing costs is pretty short with this approach.

Just let the math tell you what the outcome looks like in 6 months, 1 year, 3 years down the road between your two options.

@Pra Che

With that level of available capital to invest, you might have accredited investor status. That’s something every real estate investor should aspire to achieve, as it opens up opportunities to be more passive with your investments. With $1M, you could diversify across 20 syndicated deals in a limited partner position at $50K per deal. It would allow you to diversify across different general partners / operators, markets and asset types (e.g. large multi-family, self storage, mobile home parks, etc).

Before deploying your capital, you will need to educate yourself, meet with operators, research markets and learn how to analyze those deals at some level. Then establish deal flow by getting on several operator deal solicitations (accredited investors only), pick your operator (know, like & trust), the market and the deal. Then start deploying capital at the typical $50K minimum per deal over a certain time period you have established. Then every 3 - 7 years you should anticipate deal exits, so rinse and repeat. You will gain passive losses that can carry forward to offset passive income on the next deal. IRR can be anticipated at 15% - 20% though many value add deals with proper exit timing or refinance can achieve 30% - 50%+ IRR.

As a limited partner, you are just reviewing your monthly or quarterly communications from the operators and planning the next deployment of capital. It’s a whole different lifestyle of investing. Good luck!

@Ben Zimmerman

As I mentioned initially, using IB definitely depends on your financial position and health profile. If you are an accredited investor, you are likely well on your way in your investing career and can utilize IB to fund your investment deals without worry of the 3 - 4 year break even on a new policy. Velocity of capital means always having your capital working for you. IB is one of the tools used to do this. If you are just starting out and have a networth of less than $500K than IB is probably not for you yet.

Using the concept of a 10% average compounded return on some lump sum of capital in the stock market over X amount of years is too basic and unrealistic. Sequence of return risk exists and cannot be predicted with the market volatility.

IB strategy is based on a 4% guaranteed interest (until Jan 2022 anyway) + dividend which typically results in a 5 - 7% real return (tax free growth and tax free use of the capital). That 10% average return in the stock market, applying the lower long term capital gain tax vs short term plus expenses, would be about 7 - 8% real return. That’s basically the same real rate of return for much less risk. For my “safe working capital”, I would rather have it in a non-correlated asset like IB than in a more volatile asset. IB also is based on a private contract with a mutual life insurance company (paying dividends for the last 100+ consecutive years) and holds creditor protection in most states, none of which a brokerage account has to offer invested in the stock markets.

The actual cost of money in an IB policy designed correctly is 0.5% - 1%, which is the difference of the policy loan interest (simple interest) less the guaranteed interest + dividend (compounded) on the policy cash value growth. A policy with 2 - 3% cost of money as you have quoted was not designed correctly. That % difference sounds more like a Northwestern Mutual retail whole life policy with cash value and option for policy loan.

When you buy life insurance, you are essentially buying networth for your beneficiaries. The policy death benefit makes the 3 - 4 year break even period all worth it in itself, assuming you want to leave behind some legacy wealth. I plan on it…

@Adam Widder

Infinite banking (only if the policy is designed correctly and specially for an investor) is the best option in my opinion. It definitely depends on your personal financial position and medical profile being that the underlying vehicle is a life insurance policy. Definitely not advice for everyone’s situation though.

One major component of growing wealth is velocity of your capital. Infinite banking allows you to earn a guaranteed interest rate + dividend tax free, all while investing the same cash value in another investment (double dipping as some call it).

Infinite banking is a long term wealth strategy. Don’t use it unless you are committed to investing beyond the policy break even point (usually 3 - 4 years if the policy is designed correctly).

@Paul Henning

REITs or American Homeowner Preservation (AHP) fund could be a short term option to get 6% - 10% ‘annualized’ returns.

@Daniel Vernon

Have a game plan to deal with the following potentials:

Structural issues

Galvanized pipe plumbing

Knob and tube electrical

@Gervon Thompson

If there is promising government relief, great but I wouldn’t base your game plan around something that you might qualify for.

If you intend to be a cashflow investor, this is a simple analysis.

Can you do better than $675 / month net cashflow with a four plex house hack (or other investment) versus immediately eliminating the $675 debt payment each month?

@Erik Hansen

In addition to the smart locks, intrusion detection / cameras, flood sensors at sinks, you may want to look at automation for your thermostat as well.

@Jason L.

If you are still looking for a PM in Indy, send a message. I hold B-class properties in the area and have a solid PM.

@Brittney Anderson

Is there potential for turning it into an RV park?

That could be a higher cashflowing business if in the right location.