All Forum Posts by: John H. Hill Jr.

I'm contemplating providing private money loan to a someone that purchases homes (usually with hard money) at auctions. They claim they can have my loan back plus 10% in 30 days. My question to you all is how possible is this and/or what means do you believe this person has to guarantee such a deal?

The most logical answer I have is that once they acquire the property, they sell the property almost immediately for more than 10% of the purchase price (plus fees) knowing that their sell price is also a good deal.

Hello BP. I'm new to investing and I could use some advice on using a real estate attorney. I currently only have one rental property in Nevada near where I live. I'm in the process of purchasing a 4 door in Chicago and I'm about to start searching for an attorney (if it makes sense) to assist me with making sure all is well.

My question for you all is should I have one or more real estate attorneys? I'm not sure if it's better to have one per location (state) or one to handle all of my rental contracts in general.

@Nicole Hoss

That is my ideal approach. I would love to here more on what your experiences have been Nicole.

@Albert Bui

Powerful stuff there sir... thank you! You hit several key things that are important to me. DTI is something that I hadn't thought about. Being that I'm trying to break into building my business credit so that I can have not only HELOCs, but lines of credit in general, I would like to come to the table having as little debt as possible against my business. However, I know that using a HELOC as a credit line is also important. Maybe even more important because that's a way to build the credit up in the first place. That may main reason to go with a HELOC if I can get one with my rental property over using my 401K in my situation all things considered.

Which brings us to the idea of "both". I might just do that. Use the HELOC as a means to assist building business credit, while combining funds from my 401K to keep my DTI low and insure that my HELOC does not exceed 30% of my limit to keep my score optimal.

@Kevin S.

Yes my 401K does allow it. I believe it's also true that the money can be used for what ever I want to use it for, but will have to check to see what the specifics are on the loan terms. My plan is to pay the money back in under a year either way. I'm beginning to see that overall the best choice in my situation is going with the 401K. The only downside sounds like I'll miss out on any gains during the time that money is not in my account. Thank you sir for the feedback.

@Jaysen Medhurst

Taking those sources down in my notes sir thank you! On the interest going back into the retirement account... sweet. That's exactly how I understood it working with my 401K.

@Erik Whiting

I agree 100% on putting a HELOC on my personal residence. One thing I should have made mention of is that my wife and I are expecting a settlement to come in this year (process started last year) that will cover the funds I will borrow to purchase a great deal soon (Tax Deed Sale). I want to as much as possible get into investing in more real estate without private lenders. Although I believe it is a wonderful strategy, it's not something I'm comfortable with. I love my kneecaps. Awesome feedback sir thank you!

@Jaysen Medhurst

Have you heard that we are not allowed to take out a HELOC on investment properties? Just so that myself and Cassandra are a little more clear on this aside from doing more research on our own.

@Cassandra Sifford

Interesting point about the HELOC on the investment property. You might very well be correct and I may be at fault in thinking of a refinance when it comes to the BRRRR method of investing as the only means of putting money back into my portfolio. I will look more into that and if it's true the answer is right there in front of us.

As far as my 401K goes, I'm only planning on borrowing from it for 6 months at the most. Also, I'm under the impression that the interest on this goes directly back into what I borrowed from. So while there is an interest rate, it's really not if I have it correct. It's possible that some people's 401K works differently, but I'm pretty sure this is how it works for mine.

What say you?

I'm currently trying to decide on if I should borrow money from my 401K or use a HELOC. Please share you thoughts!

Let say that I'm able to use my 401K to borrow $30K. The other alternative would be for me to transfer my current rental property into my 2 month old LLC which I want to do anyway, and obtain a HELOC with the equity I have in it. Let's also assume that this will give me a HELOC at $30K. Which option would be best in your opinion? I'm planning to use the money to BRRRR. This will be on OTC tax deed and my second rental property.