All Forum Posts by: Richard Patrie

I paid off my house in 2017. I opened a HELOC and secured 180K on my primary residence. I then used the HELOC to buy a rental property and paid 55K. This is a good strategy because you can pay cash, and the deal isn't contingent on obtaining a mortgage. I dumped 10K into it to replace the roof and other exterior cosmetics. I rented out both units for about a year, then refinanced. It appraised at $77,500, and took out a 62K mortgage. I can now pay off the HELOC. Instead, I put a little money aside and made a down payment on another property. I deposit all of the income from my W2 job into my HELOC. This reduces the average daily balance, and lowers the interest paid. You could also deposit all rental proceeds to your HELOC until it is paid, then repeat the process.

I've used this strategy to buy 7 properties in the last year. I bought my first rental in Oct 2017. 

If you acquired the HELOC on your primary residence and then move, you need to see if your bank will allow you to keep the HELOC since you no longer occupy the home. Why not stay where you are and buy a second property to rent?

I buy and hold in C-class neighborhoods. The area has been immune to wide range market shifts. 

Property taxes.

@Brian Eastman Thanks. I just found that out after speaking with the custodian. They did say that I could lend to other parties as a private lender, so that's an option. 

I don't factor in appreciation when calculating cash flow. I don't assume what might happen. If it does appreciate, that's great. If the value tanks, which is a real possibility, then you're holding the bag.

Hi BP Community!

I'm a year into my real estate investment journey, and learning as I go. In the last year I've acquired 7 properties through a mix of seller-financing and my HELOC (1st lien position).

These properties are held in 2 LLCs, and I own 5 of them free and clear.

I have a self-directed IRA and was looking at using it to acquire rental property. I really didn't like the option of the IRA owning the property because it doesn't allow me to touch the property in any way. I can't make any DIY repairs, deal with tenants, collect rent etc. The IRS views this as a benefit to me and not for the good of the IRA. If I do the work myself, then the IRS perceives that I am personally benefiting by providing sweat equity. I found this pretty restrictive.

Then I got to thinking. Currently, my self directed IRA holds peer-peer notes from Lending Club. (www.LendingClub.com) This platform allows investors to lend money to individuals to buy a car, consolidate debt, make home improvements, pay medical bills, etc.

So, in the IRA I hold thousands of notes ($25 each) for a fixed term (3 or 5 years) at a fixed rate of return; usually 5-8%.

Has anyone ever used their self directed IRA to hold the mortgage on a rental property?

I'd like to refinance a duplex that is held in my LLC. The LLC would still own the house, and the IRA would hold the paper. I'd then make monthly payments over a 15 yr period at 7% back to the IRA.

Since the IRA isn't on the deed, and the house isn't occupied by me, my friends, or family, I don't see how this would violate IRS rules. It'd be no different than going to a bank with the same outcome.

I plan to speak with my IRA custodian, I just wanted to see if anyone has employed this strategy, and provide any thoughts.

Thanks

@Sulaiman Shah I signed up based on the feedback I saw here. It's true that you can get a lot of credit, but it is very limited in use. Again it is good for buying things or paying bills. The only way to pull cash off is buying gold and then selling it. After a couple transactions using one of the cards, the transactions were declined. In fact, none of the cards ended up being accepted since the banks can see you making numerous purchases. They know what you're doing. Perhaps if you made 100 small purchases over time to buy gold, then sell it, then wire to your account, you could have enough for a down payment (maybe). Another way is a balance transfer to a personal card. The business cards won't allow an ACH transfer to a bank account, whereas personal cards do.

I can transfer 30K to my bank account from a personal BofA card for a 4% fee with 0% until Mar 2020. Then, pay it off by transferring funds from the business cards while incurring and additional 3-4% fee. Still not a bad deal for unsecured debt. But other than getting the balance off your personal credit report, you get a better deal with a longer term on your personal card. Sure it will impact your credit score, but if you don't plan to seek more credit in the near term, who cares? 

I've used a HELOC on my personal residence to buy 4 properties. My goal was to secure funding to pay off the HELOC. I've been able to get a little money off the cards (you can only use Mastercard for mortgage payments), but it doesn't work well for what I am looking to do.

Everything they do secure business credit can be done on your own if you have a lot of time to spare. I don't. 

I'm not knocking the program as it can be helpful for some, it just wasn't for me. 

@Sulaiman Shah Pulling money off them to buy a property is close to impossible.

I received over 100K in cards. This sounds great, but pulling cash off them is tough. If you want to use them for purchases or make bill payments through Plastiq, it works well. If you were planning to pay off your personal HELOC, forget it.

@Ken Yeung I live in NY and have been looking at properties in C-class neighborhoods. I'm finding there are areas with decent homes under 50K that don't need a lot of rehab, with potential returns of 12-18%.