All Forum Posts by: David Wilhite

overall, being your own banker can allow you to get on the right side of compound interest. If you are earning net interest across ALL your finances then your wealth is growing. Hopefully it is growing at a compounded rate. Being your own banker is what allows you to pay a 30 year mortgage and all your debts in as little as 5 to 7 years - 13 tops. I see it as a way to acquire that free-and-clear portfolio every real estate investor wants or at least a means to become a homeowner instead of a loanowner. 

Infinite banking, velocity banking, laser banking, etc. its all about being your own banker (BYOB). And at the end of the day it is MATH. If you really wanna go down that rabbit hole, there are some actuaries on YouTube speaking on the subject and I dare you to follow along with them. This is the "vodoo math" that the oldest and most well-established financial institutions on the PLANET have used to grow massive fortunes that have stood the test of time through wars, natural disasters, revolutions, and all manner of social upheaval and unrest. Some of these companies are older than the countries some of us were born in.

We can argue over how we can best use these strategies to build our wealth but it is beyond argument that fortunes have already been built on these ideas.

But this is great! All these perspectives are helping us reach a more informed truth that we can all benefit from. 

@Thomas Rutkowski

🤯🤯🤯 Ok wow thanks! That is some great context and a very well informed opinion. I like that there is even a name for the strategy/business model: double play.

I'm reading into Doug Andrew and the LASER banking method. It's all very fascinating to me, I can see real estate investors among others being able to really benefit from ideas like these.

@Matt Ruttenberg thank you very much this is excellent input!

I've been reading into infinite banking, velocity banking, and just recently laser banking. Seems like basically the same concept but with different vehicles.

I *just* got my insurance license so I'm exploring how to combine REI in order to offer investors a different look on wealth building and retirement planning.

My guy this is GOLD!! Thank you for your input.

There is this guy on IG @mr_brrrr and he makes a lot of content talking about using whole life insurance policies to fund a BRRRR strategy. Has anyone ever heard of doing the same thing with Indexed Universal Life insurance policies?

No @Richard Elvin that doesn't really clarify things at all. I think your own conflation and proficient use of non-sequiturs is actually doing much the opposite so kindly stop.

Please point out ANYWHERE I said ANYTHING about listing a property.

I said pay down mortgage and build equity. Now people are ready to fight me. I realize that is NOT the ONLY way to build equity.

Many would bake that equity in by buying below market value for a property they can fix up in order to justify higher rents and a higher appraisal. There are several moving parts and obstacles with this approach - least of which are actually waiting around for someone who will take less money for their property, getting renovations completed on time and on budget, and praying for a good appraisal so you don't lose your shirt.

Of course there is always risk involved but there is also a lot of finger crossing going on here. 

But I'm not even sure a complete novice could confuse the interest deduction on a primary residence with the purchase of an additional investment property. Meth is not your friend.

Which is easier: forcing speculative equity or tapping natural equity? 

The answer is you can do both if you're building equity 3X faster and last I checked having options is better than having only one.

Equity. Balance sheet. Net worth. Wealth. I'm not speaking in code.

Lastly, you wrote it yourself that the refi comes after the rent - not the rehab. Why do you need to rent it for a while before your refi? To build equity. A circuitous method of proving my point but thank you all the same.

BRRRR.

did I stutter?

BRRRR.

you guys are on BP so you've read the book, read the articles, blah blah blah.

BRRRR.

Of course there is a TRANSACTION COST every time you refi. are you gonna sit here and list out all the COSTS of REI? we'd be here all decade.

because INTEREST is a pretty big cost that y'all are really downplaying in all your imminent wisdom.

But I get it. You do you and I'll do me.,

Which is how it was gonna be before gregariously answering my question with a barrage of extraneous irrelevance.

BRRRR.

One of those Rs is for refinance. A refinance is a mortgage loan. Stop adding more to the formula with all these exceptions and maybe this or if that happens or something else could happen.

That's a whole lot of uncertainty but one thing for certain is that the loan is going to get paid. By somebody. Come hell or high water. This is an inescapable fact - why is this even a debate???

I asked if systematically paying down a mortgage faster would accelerate a BRRRR strategy. The short answer is yes. Thanks for playing.

let me try it a little slower for the fast thinkers:

take out loan.

buy house.

rehab house.

get tenant.

build equity.

cash out refi.

repeat the process.

Now, I don't know how long this process takes you. Different investors are going to have different timeframes. What I do know is that the cash out refinance comes after you build equity. 

ALL I AM SAYING IS TO DO THE SAME THING FASTER!!!

Did you guys get that? F. A. S. T. E. R. Faster.

From what I think I understand about Buy, Rehab, Rent, Refinance, Repeat is that you are taking out a loan. Not all investors even do loans so not all investors do BRRRR. Thank you for stating the obvious. For the rest who are following along with the book - they are taking out mortgages on each and every property. The whole leverage thing you guys keep going on about.

The house is not the most expensive thing, the mortgage is. Ring a bell anyone? As such, on a typical 30-year the monthly payment basically amounts to the relative minimum payment on a credit card: it is the schedule that will have you paying the most interest for the longest period of time. 

Understandably, some would counter this by basically saying "who cares? as long as my property is cash flowing I don't care what the mortgage is! I'll keep paying that mortgage forever as long as the house is paying me!!!!" 

And I get it. Get paid forever. Who doesn't want that?

But you're also saying that you'll pay the maximum amount of mortgage interest over the life of all your loans for the rest of your life... as long as you're cashflowing positive.

Let's repeat that slower:

Pay.

Maximum.

Interest.

Rest.

Of.

Life.

This is not about rate. This is about interest volume and the fact that by the time that house is paid off (never for most of us it seems) you'd have paid "X" amount in interest costs far, far, far above the value of the underlying asset.

You know what I am talking about? Of course you do.

My revolutionary idea is to pay the mortgage faster... so as to pay less interest... so as to effectively redirect money I would be giving TO THE LENDER anyways... and using it to buy more properties instead.

It. Is. Math. Yawl are missing my point.

You can keep the loan for your entire life if you want. But why wouldn't you want to pay it faster or asked another way - why would you want to give all that interest money to the lender that you could otherwise be using to buy more properties?

And even for the "lending professionals" in the room: why wouldn't you want people paying off mortgages quicker if they were gonna keep coming back to you to refi every time FOR THE REST OF THEIR LIVES?

But hey, everybody has their own $0.02 including me. I'm just following the math and it makes sense to me: less money in lender pocket = more money in mine.

Yes @Andrew Postell you can craft all manner of creative arrangements to bake equity into a property but I'm talking a straight a BRRRR situation as the book spells out. @Sam Yin is on the right track with the HELOC and I'll add to that the same idea can be done even with a checking & savings account. With discipline and/or the right tools...

Pay loan faster. Pay less interest. Buy more house instead. The math is exponential over time - just like the interest we pay to the lender. Only difference is we're hopefully using that money to build our wealth and not the lender's.

Doesn't seem so radical a thought to me.

Quote from @Andrew Postell:

@David Wilhite paying down your mortgage goes AGAINST just about every principle of real estate that there is.  Meaning, if I gave you $50,000 right now - would you pay down your mortgage or go acquire another property?  The theory is that your TENANT is paying down your mortgage.  The mortgage interest is tax deductible.  The less equity you have in a property the less that someone can take it from you in a lawsuit. I am personally millions of dollars in debt...but the only way for me to own millions of dollars of real estate is by NOT paying down my tax deductible debt and continue to purchase more real estate.  

I hope all of this makes sense.

 ...i understand we love to hear ourselves talk but i think you're missing my point. actually you may be missing several of them.

first and foremost you're not gonna give me $50,000.

according to the amortization table, you ARE going to pay off that loan according to schedule or else. whether it comes out of your pocket or your tenant's is immaterial to your outstanding loan balance.

the portion of your mortgage payment that is interest is tax deductible. your write offs decrease every month as the principle portion gradually decreases for the life of the loan. people either move or refinance every 7 years so the write offs can reset on a new loan... but how's that going for the folks moving from a %3 loan to a %7+ loan today? could've sworn i saw mortgage applications go off a cliff recently.

i'm talking about paying your mortgage down faster so you can buy your next property faster - as in BRRRR investors who desire to multiply their portfolio. or maybe it's for someone nearing retirement age and want their primary residence to be free and clear in their golden years. it depends on the situation...

if you have millions of dollars in real estate then i imagine you have rock solid tax planning, insurance, and entity structures that shield you from liability but hey they must do things different in Texas.

whether any of this makes sense to you is inconsequential.

Ok so I know most everybody has heard about making biweekly mortgage payments in order to pay your mortgage down faster. Instead of making 12 monthly payments a year you make 26 half payments or 1 extra monthly payment per year. Over time, this additional annual payment can subtract approximately 7 years off the life of a typical 30 year mortgage. The challenge, of course, is sticking to the schedule and tracking your savings so you know how much you are reallocating toward your financial objectives that would have otherwise gone to your lender.

But how could something like this work with a BRRRR? I understand that the property is being rented so if the tenant is paying the mortgage (ideally) then why go to extra trouble to pay down the mortgage faster? Didn't that extra trouble actually build your equity faster though? If you can reduce the life of your 30 year by %20+ then aren't you able to buy your next property %20 faster to keep the BRRRR going and build the portfolio quicker?

With these thoughts and others in mind - how would you go about paying more on your mortgage so you can pay it down faster so you can buy your next house faster?