All Forum Posts by: Ade Adesuyi

Hey Katharine, I tried applying for a HELOC from Penfed but they couldn't give it to me because I own more than 4 properties. They generally don't give HELOCs to individuals who own more than 4 properties because at that point they consider it a "business". This something that was decided and set by their board of directors. Are there any similar restrictions or any restrictiona with BO (Bank of Oklahoma)?

I wanted to use it so I wouldn't have to use a bank for funds in the future.  Also, you can really make your policy snowball by taking your profits from your real estate, and feeding it right back in to the policy.  All the money I put away for future expenses on my buy and holds, I'll stash into the policy so it's not just sitting in a bank account not getting an appreciable rate of return.  If the banks close or have bank holiday, I'll always have access to cash.  The funds in the policy are pretty liquid; it takes 7-10 days to get the funds disbursed.   Other benefits are that you can use it as a retirement vehicle and pay yourself from the cash value as a policy loan (which is NOT taxable).  So, you can use the cash value and all interest accrued over time tax-free (because your taking it out as a loan).  You can also borrow from it for your kids college fund, wedding, first car, etc.  The idea is you pay yourself back and save part of the interest cost you would have paid by using a bank.  You can pay back the loan on what ever time schedule you want.  It might be 2 yrs before you make a principle payment (you just have to pay accrued interest on the loan annually).  You can use this as a legacy vehicle for the family.  Your policy is not subject to the unpredictability of the stock market; if stock market crashes, your policy will still grow at a conservative rate of return with dividends.  You can start borrowing against your cash value from month 1 of starting your policy, without affecting the rate of return of the entire amount in the policy.  You can transfer over your policy to your kids.  I believe it's not subject to lawsuits or divorce settlements. (I'll have double check).

Some of the downsides are that you have to wait 7-10 years to accumulate enough funds for it to be useful for big loans.  You'll have to educate yourself first, so you have the policy set up in the right way.  You'll have to find the right financial advisor that understands this strategy, because most never heard of it before or not a fan of it because it cuts into their profits.  You have to be relatively healthy to qualify for one of these policies.  You cannot put higher than a specified ratio of money into the cash value because you'd be in danger of reaching what is called MEC (modified endowment contract).  This is where the IRS starts taxing.  Stay below this line and you'll be fine.  The financial advisor will be able to set your maximum amount without crossing the MEC line.

I have been using this strategy for the last year and I'm still at the stage where I'm building up my cash value. I was dubious at first, and was totally against whole life insurance in general. So I researched this for about 7 months before I went ahead. The only way this would work is if you setup your policy the right way and go with a company that suits this strategy. You're basically buying this policy for the life benefits, and not the death benefit. I can care less about the death benefit. You want the least amount of your premium going to the death benefit, and a good portion going to cash value. When I pay my premium I have money immediately available to borrow from in year 1, while the whole amount that I have put in already is continually growing with interest and dividends. After I started my policy I called customer service to make sure this was the case. But it's absolutely crucial you educate yourself first, so you no how the numbers are supposed to work, and so a financial advisor doesn't try to screw you over. Buying whole insurance is like buying a property; it's all about how the deal is set up in the beginning that predicts whether is a good deal or not. It takes 7-10 years buildup, and you pass the amount that you put in at that time also. I'm using this strategy for retirement, for real estate, and for an educational fund for my kids. I'm steering clear of the stock market or any conventional retirement vehicles like IRA or 401K or anything attached to the stock market, because if the bottom falls out, I'll be fine.

Will definitely post an update.  Thanks!

Bam!!!  Got it!  Did one of the those online people finder services and talked to a younger individual (not an 86 year old woman).  She actually turned out to be very helpful and forthcoming and gave me her insurance carrier, agent's info, and claim number.  Thanks for all your help and info.  Always nice to turn to BP when you find your self stuck.

Thanks alot.  Appreciate the info!  I'm all over this.

Over a month ago, there was a house that caught fire which extended to my rental property.  It only effected the siding of the house with some electrical damage.  Also, the door got busted in by the fire dept.  The house on fire apparently has been vacant for about 1 year, but has full insurance coverage.  When I talked to the investigator on site, he suspected insurance fraud, although this is not conclusive.  I gave him my information and immediately called my insurance company.  My deductible is $5000, and after depreciation, my check would be next to nothing.    Thing is, it's been over month, and haven't heard back.  Had to fix the door immediately, however the tenants are not happy about the aesthesics of the house.  It's still livable, just some electrical damage on that side of the house.  I estimate the damage to be around $6,200.  I looked up the owners on the tax assessor website, and googled them.  They are a elderly couple in their 80s, one of which died in 2009.  Don't how to get in touch with the other owner.  For all I know, both could have passed (reason for the vacancy) and inherited by the kids.  What are my options?  How do I find out who their insurance company is?  I read that policy information is private and not in public records.  Should I get a lawyer and handle this in court??  But I'm afraid the court fees may overshadow the repair fees.  Or should I just suck it up and repair it myself out-of-pocket, which to me sounds insane since my property had nothing to do with the fire.   

I had issues trying to buy a 7 property (9 unit) portfolio.  Trying to finance it was difficult.  Blanket loans would be the easiest way if you can get one, but just like Mike said, it's difficult to sell each one since it's like they're married together.  I tried to buy them individually, luckily I wouldn't go over my mortgage limit according to Fannie/Freddie.  But then you have to pay for 7 appraisals, 7 inspections, closing costs for 7 properties....it's starts to get really expensive outside of the down payment.  I was looking at $20,000 just for closing costs and due diligence.  It was just to complicated, and ended up buying 3 of the properties cash.  When someone sells multiunit portfolios, I'm starting to realize those are geared towards cash buyers.  Financing is difficult but not impossible.  I'm not even sure how long it takes to close on these type of deals.

Center township will get you nice cash flowing properties, but they're more distressed than the outskirts of down town.  There will be more maintenance and lower quality tenants.  Rents may range from $300-$650.  I hear 46208 is the worst zip code in Indy.  More current houses and better tenants you'll find in Lawrence, Warren, Perry-Meridian, and Franklin Townships.  You can still find some 1-1.5% rule if you looks hard and give a lot of offers.  

But what if you have a property in an LLC, and you quitclaim deeded the property into your personal name, then what would the tax implications be?