Introducing "The HELOC Cycle"

Last month I took the dive into completely utilizing Other People's Money to purchase a Triplex in my home town. Primarily - The Bank's. 

After countless books, blogs and podcasts, it was still the most stressful period of my life.

The mind set was that this was possible but, What If?!

-I lose my job

-The property suddenly becomes completely vacant

-Someone slips and sues me

-The renovation will consume my entire life and I may neglect my family and friends

The list goes on and on and these things are highly unlikely to happen. Reference the law of averages.

The numbers were completed hundreds of times and no matter how much negative padding I put on the down side, the property still cash flowed $1000 per month after absolutely every imaginable expense.

The key was to combat negativity by listening to the Kings: Don Campbell, Dave Lindahl and Robert Kiyosaki.

Now to the O.P.M.

The birth of this deal came from opening a Home Equity Line of Credit. This line is available after you have a minimum of 20% equity on your principle residence. When you exceed this equity balance in your favor, the amount is made usable to you. Quite simply put: Every mortgage payment builds you a larger line of credit. The best part you ask? The interest rate is only Prime plus .5%! Talk to your local bank, this is the cheapest money on the market. 

The Worst Part: Risking your house is also the stupidest thing you can do if unprepared, I have to include this because the line is secured against your residence and a lack of disciplined knowledge will leave you homeless.

However,

It became apparent that I should not employ my own savings to make my down payments. This discovery led me a very repeatable strategy I call The HELOC Cycle. Let’s examine some numbers to show the simplicity:

$100000 Multi-Family

$20000 Down

$1700 Monthly Expenses

$2800 Rental Income

$20000 from my HELOC only cost me $53 a month in interest to employ. 20000 x 3.2% = 640/12 months = $53.33. With the $1100 positive cash flow, a total of $1047 could be aggressively re-paid to the line of credit. YOU COULD BE READY TO REPEAT THE PROCESS IN AS LITTLE AS 19 MONTHS!

Obviously, this process will not interest the investor who is looking for a little extra spending money or the future mogul who wants to multiply doors like Grant Cardone but I insist that adding a property every 2 years will greatly improve the stability of your future.