All Forum Posts by: Account Closed

Hey! From Morristown, NJ :) Got the keyword update and figured I'd check in. Best of luck in your new adventure! I'm starting similarly -- easier properties while I learn the ropes.

Erik

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Thank you all, so much, for taking time to answer my questions in ways that make sense. It's so nice to be in an online community where people really seem to care about helping each other.

Now, to get the property!

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Originally posted by @Steve Milford:

@Erik Donough @Jack Orthman

Jack has it right, do what wealthier do, buy for cash flow, with leverage to build a nest egg to do it again and again.

Thank you, Jack and Steve, for taking the time to reply. I really appreciate the advice.

So, let me ask a followup question, if I may. When you say build up a cash reserve for a future purchase, do you mean a strict savings account while the HELOC (down payment) principal stays static (10 years of interest only), or dump all cash flow back into the HELOC principal to allow me to use the HELOC again in the future to do a down payment on another property?

Thanks, again, for taking the time!

1 Vote

Originally posted by @Jody Sperling:

Originally posted by @Account Closed:

Originally posted by @Jody Sperling:

When you're in growth mode, dump everything into the HELOC. Your whole paycheck, any side-business money, all your emergency funds.

Some people are afraid of this philosophy, and there are a few reasons to express a certain amount of caution, but if you make more than you spend, you won't be hurt by this philosophy.

People talk about cashflow as if you can predict the future, and they forget money today is more valuable than money tomorrow. Inflation is killing your money, and interest is killing your money.

If you apply every bit of surplus cash from your rental to the pay-down of your HELOC, you'll avoid the most interest; you'll replenish your funds faster; and you'll be able to buy sooner. (If you have an emergency, use the HELOC to pay for it.)

People always talk about the debt snowball in terms of paying off debt, but no one talks about the debt snowball in terms of leverage: greater leverage, faster growth. The more well-bought assets you have, the better they pay, and the better they pay the larger the discrepancy between what you owe and what you can pay.

I highly recommend you research Velocity Banking. Mike Adams, WiseGuysInTies, The Kwak Brothers all have fantastic videos online of how to use HELOCs to reduce debt while growing assets assertively. Best of luck to you!

Thanks so much for your thoughts, Jody. I am familiar with Velocity, but I hadn't really thought of it from a business perspective. You bring up really good points.

Here's a question, though. If my safety net/retirement investments are making, on average, 7% annual returns, and my HELOC is at 4%, would it make more sense to pay the minimums on the HELOC and invest the rest of any positive growth?

People are going to differ in their philosophy here, but in growth-mode, I am a huge advocate of diverting stock and retirement funding in favor of real estate gathering. Returns on real estate tend to grow at more than 7% when you consider tax savings, appreciation, cash-flow and equity building.

With a HELOC, you never need to disrupt that four-pronged wealth generation, so you can simultaneously attack debt and grow equity. When you reach your growth goals you can refinance paid-off properties to invest in retirement and stocks again.

Though I will admit, for transparency's sake, I own no 401k, IRA, or HSA type accounts. My wife and I hold roughly 10k in individual stocks, and mostly speculate for fun/profit. If I were FIRE extreme, I'd definitely pull that money out of stock and dump it in Vanguard or at least pay off debt.

I get it. That's a really aggressive strategy! It's definitely food for thought, and in ways I hadn't considered.

Thanks so much for your insights!

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Originally posted by @Theresa Harris:

If you do extra payments on your mortgage, the only way to get it out to reinvest will be to refinance which will cost you more. Put it somewhere that allows you to easily access it later while still saving you money.

Hey Theresa. Thanks so much for sharing your thoughts! Your POV about easily accessible funds is something I hadn't thought about.

Yes, the plan is to cash out refi once there's enough equity to pay off the balance of the HELOC (the good news is that our broker offers fee-free refinancing).

You're right about the access. Putting the cash flow into the HELOC month after month would certainly make funds more available easily, as opposed to a month or two long refinance process.

Thank you for weighing in!

1 Vote

Originally posted by @Jody Sperling:

When you're in growth mode, dump everything into the HELOC. Your whole paycheck, any side-business money, all your emergency funds.

Some people are afraid of this philosophy, and there are a few reasons to express a certain amount of caution, but if you make more than you spend, you won't be hurt by this philosophy.

People talk about cashflow as if you can predict the future, and they forget money today is more valuable than money tomorrow. Inflation is killing your money, and interest is killing your money.

Thanks so much for your thoughts, Jody. I am familiar with Velocity, but I hadn't really thought of it from a business perspective. You bring up really good points.

2 Votes

Forgive me if this has been covered elsewhere. I searched but couldn't find the answer to my specific question.

I'm looking to buy my first rental property with a down payment/closing costs from my primary residence's HELOC (currently 4%) and a mortgage (3.125%) for the rest. The properties I've got my eye one can potentially cash flow around $175-200/month.

Longer term, my goal is to use gains to continue buying rentals.

My question is this -- what should I do with the cash flow to get ready to do the next property down the road? Put it into the HELOC? Make extra principal payments on the mortgage? Other options I'm not seeing?

Thanks so much for any advice!!

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Originally posted by @Michael Fitzgerald:

Hi everyone!

My name is Mike Fitzgerald. I live in Bergen County, New Jersey about 5 miles outside of New York City. As of right now, I have no previous experience in real estate.

I was introduced to the idea of FInancial Independence by the Bigger Pockets Money Podcast about a month ago & I've been hooked on the idea ever since. My first step toward this goal is to pay down my $62k in student loan debt, which I'm in the process of refinancing down to under a 6% interest rate right now. My goal is to pay this off within the next two years & then turn my attention towards investing in real estate.

Over the past month, I've listened to many books, including some from BP (How to Invest in Real Estate, Long Distance Real Estate Investing, The Book on Rental Property Investing, Investing in Real Estate with No & Low Money Down, & I'm working on the BRRRR audiobook now). I have also attended the last two webinars & plan to upgrade to Pro once I get closer to paying off my loan debt.

While I'm paying off my loans, I am also trying to save money so I can house hack once the loans are paid off. After that, since where I live is one of the wealthiest counties in the country (and no I do not live in one of the wealthy parts), I think my best bets will be to invest outside of my market with the BRRRR strategy, but I am also open to the idea of investing locally at the right price.

Anyway, I just wanted to introduce myself & I hope everyone & their families are staying happy & healthy!

From one northern NJ newbie to another, best of luck! :)

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All Forum Posts by: Account Closed

Account Closed has started 6 posts and replied 48 times.

Post: New member introduction

Post: What to do with cash flow?

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Post: What to do with cash flow?

Post: Mike From Bergen County, NJ