All Forum Posts by: Nathan W.

Thanks for attempting advice I appreciate that. 

I will overlook the fact that you think someone who has had three posts removed in this thread due to abuse/trolling should be accepted graciously. His "advice", in the most generous sense of the word, addressed his opinion of the quality of the deal, defining irony from a viral website, and then repeating back advice to use OPM via a 75% conventional/25% HELOC which was EXACTLY what I had been proposing. This was painfully obvious to anyone who actually bothered to read and comprehend the thread.

So you mention that I need to understand the risk and decide if the risk is worth it.  Well, obviously.  My question still, as it has been this entire thread is, WHAT ARE THE POTENTIAL CONS (aka RISKS) THAT I MAY BE MISSING?  I didn't see any presented in your thread, but I apologize if I might have missed them.

LOL this is a JOKE right? OPM is not a difficult concept to grasp--I know you were being patronizing but the ONLY reason I even asked that question is because you literally suggested doing what I had been proposing the entire thread. I mentioned doing a 75% conventional and a 25% HELOC for the down payment no fewer than TEN times.

When you merely reposted my advice, I must admit I was confused.  I asked the question above because I made the mistake of giving you the benefit of the doubt that you could read at an 8th grade  level, and had digested what I had previously said.  It turns out you are just out to lunch and looking for trolling opportunites.  I am not interested, and apparently neither are the mods since they have deleted 3 of your posts....

Acknowledge better deals exist.  

But again, my intent was to discuss the creative financing aspect of THIS hypothetical deal that I know many people on BP would jump on if it were a straight forward, 25% down out of pocket scenario.  This hypothetical property is a fine property, according to most BP standards.  

If this were presented as "hey guys, I have saved up $25k over the past 31 months to buy a rental property. Found one for $85k, rents for $1000. Got approved for a conventional 75% LTV loan. After all expenses, my expected cash flow is $220/month, for a 11% COC return." I'm not sure there would be a lot of naysayers telling them to forego it in search of something much much better.

This is only in question because of the desire to fund the downpayment out of the HELOC leaves a temporary deficit, which I have shown mathematically is more desirable than waiting 31 months to save up that down payment.

I'm not sure what the downside of that is. 

I didn't bring up the rent increases as if they were guaranteed.  I mention rent increases because it is, more often than not, more advantageous to get into a property sooner than later.  Two years of POTENTIAL rent increases is not something I would underwrite to, but it certainly is not unreasonable to think they more than likely will occur.  What is bankable is that waiting 2.5 years to get into that property gives you a 0% chance of rent increases (at least at the same purchase price).

I didn't bring up tax treatment as anything but icing on the cake. As the math shows, it is more advantageous financially to get into that property with a HELOC down payment and pay off that HELOC in 27 months rather than waiting 31 months if your savings/paydown rate is the same. Taxes ARE the icing on that financially beneficial cake. They were brought up to contrast, again, the benefits of putting down payment with the HELOC vs. saving it up (which is not tax advantaged)

My question is--what is potentially being overlooked in that analysis? What cons come with that?  I am not seeing any convincing ones.

I'm not sure I agree. As I have mentioned, I am essentially just using the HELOC loan to "save up" my down payment at an accelerated rate (27 months vs. 31 months), while taking advantage of the tax benefits, 2 years of principal pay down on the conventional loan, 2 years of rent increases, and locking in current low conventional financing rates.

The hypothetical investment itself is not negative cash flow--it is a decent investment with greater than 8% ROI unfinanced/11-12% cash on cash return if 25% conventional financing is used.

If the options are to buy an investment 100% cash, conventnioal finance with 25% down, or conventional finance with 25% HELOC down, the latter is the best of the three options from my analysis. Do you disagree?

You agreed with Option 3, but then presented Option 4 "75% conventional + 25% HELOC" which was not option 3??!??!

Ok, you are all over the place and it is becoming very tiresome.  I think Mark Twain had the best advice here, so whether you think I the idiot or I you, it is probably best we part ways on this.  

Best of luck to you in...whatever it is you do....

You do realize, at no point in this thread, have I mentioned putting $85k into the deal, from either my personal funds OR my HELOC right?

I am quite mystified by your advice to use a 75% conventional mortgage plus 25% from my HELOC to finance the deal, when that is literally what I have mentioned at least 10 times in this thread. Are you confused?

@Account Closed

Are you telling me to use a 75% conventional mortgage plus 25% from my HELOC?

 The irony of someone unintentionally embedding their posts into a quote, as their entire response, while accusing someone of having a reading comprehension problem, cannot be understated.

But no I do not understand.....

Are you telling me to use a 75% conventional mortgage plus 25% from my HELOC?

 LOL the answer I want is for someone to present the negatives of Option 3 vs. Option 2 as I mentioned them above.  I want to ensure that I am considering the angles and pitfalls of Option 3.  

It is comical to me that you think someone taking advantage of a HELOC, with its noted tax advantages above, to get into the game immediately does NOT make one an "investor" but that waiting nearly 3 years to get in on the action, while missing out on those other benefits, DOES make one an "investor".

Or are you saying that neither are "investors" because.....reasons? They are, after all, getting into the game from the same W2 input (the HELOC guy just requiring less of it lol).

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But I'll bite

So do you care to walk through an example of OPM at 4.25% rate, with the parameters given here?

Are you saying use OPM to borrow the full purchase price, or just the down payment? 

What does your end game look like with the numbers you gave?

I provided the numbers in mine, I have seen nothing but words and lazy trolling from yours.  

Because there is no difference in paying off the HELOC with W2 earnings and saving a down payment with W2 earnings--except for the advantages of the former I mentioned above.

If those were the two options, one should probably ask why would you NOT want to pay off the HELOC with W2 earnings? From the way I see it anyway.

Seriously man, if you would actually like to discuss the comparison between Option 2 and Option 3 as I outlined them above, I would welcome your input.  Otherwise I kindly ask that you would stop trolling this thread--you aren't impressing anyone but yourself.