All Forum Posts by: Will Barnard

I like Texas too, and although the property taxes are higher than in some states, so are the rents you can receive which offset the expense. Further more, if you move to Texas and become a resident, there are no state income taxes which will also benefit you and offset the higher prop. taxes.

First of all, no bank currently will allow you to borrow the full 100% of your home. However, for sake of example, the 100k in equity in your example above does increase your mortgage payment on that home, but if you use the cash equity to purchase an income producing asset such as rental property, the equity line loan is paid back by the income the new property is producing and not out of your own pocket. Further more, the equity line interest is tax deductible and HELOCS currently have the lowest interest rates and lowest fees of any other loan today.

I would venture to guess that very few investors use this strategy. For one, it takes quite a while to pay off the mortgage in full, therefore, each investment would be few and far between. Second and most importantly, you are losing the power of leverage.

Another thing to consider is what type of RE investing do you want to specialize in. If you are planning a buy and hold strategy (becoming a landlord), you have many areas to choose from, some better than others. If you want to fix and flip / rehab, there are many markets where this is too "risky" for lack of a better word.

Decide what you want to do and then where you will do it is my suggetion in a nut shell.

AND there is always more than one way to "skin the cat";. Just another wonderful advantage to investing in RE. So many options and many different ways to invest!

Nice explanation of a creative strategy to acquire corporate credit. As mentioned, keep the funds seperate and NEVER comingle funds from personal to entity. That is a sure fire way to open the doors for leagl and financial liability as any competant attorney could "break the corporate vail" by proving the entity and you are one and the same do to the funds being comingled.

Always use an experienced RE CPA and attorney when setting up and operating a RE business, regardless of the entity chosen.

Welcome to BP Debbie! Great to have you here. My favorite area in the country to invest is in the Metroplex. I have many properties there and will actually be there next week working on deals.

You are correct about lease options in Texas. Realtors/agents/yourself can not leagally do them in that state. The only way they can be done is to have an attorney draw them up. There are a few ways around it, but which ever way you choose, I highly recommend an attorney on your team who is highly experienced in the RE field.

One option is to sell via a wrap mortgage which would be leaving your current mortgage in place, and selling to the buyer at an interest rate higher than that of your current and thus keeping the "spread" You also put the responsibility of taxes and insurance as well as repairs and maintenance on the new buyer rather than yourself which will increase your cash flow. You also avoid property management fees (if you are using them, and if not, you no longer have to self-manage). You will hear about the banks "due on sale clause" which states that if you transfer title to another partie, they have the right to call the full loan due and payable. While this is true, it very, very rarely happens. Particularly now as banks don't care who pays the mortgage, as long as they get it. You may also avoid this clause by implementing a land trust. Search for a thread here on BP on land trusts or go to my website and click on the land trust link. It will take you directly to a BP member who is an expert on the subject.

Good luck and feel free to ask any additional questions here on BP or to me directly. We are here to help.

Michael,
You make a valid point and I was thinking from a federal standpoint in my statements. Thank you for clearing that up. Individual states have their own rules/laws/regulations and filing requirements/minute recordings/corporate meetings on the state level should be investigated prior to forming an entity. As Michale stated, check your state law or have your CPA/tax attorney inform you of the local rules.

Mike, I agree with your statement 100%, however, my suggestion to use a HELOC is for the SOLE use of purchasing assets and not liabilities. Many of the people/example you mentioned, purchased liabilities such as put in a pool, bought a car or boat, etc. Utilizing money stored in the walls of your home via a HELOC to buy liabilities would be careless and put the homeowner at risk of becoming "upside down"

Purchasing cash producing assets such as rental properties (doing it the right way of course), is a whole different ball game and I would encourage anyone to do it. Particularly those who have the abition and drive to better their financial futures.

not borrowing money

The less debt I carry I figure it will help the banks, and yes I want to be responsible and also own my -property free and clear one day.

Why would you feel the need to help the banks? If you were in financial trouble, would the bank reach out to help you? I doubt it! Why is owning your home free and clear responsible? Warren Buffet, one of the smartest and wealthiest men in America, carries a mortgage on his home! Why? His mortgage loan is the cheapest borrowed money he has ever received and he gets a tax deduction on the interest he pays. That was his answer and I agree 100%

Holding a large amount of equity in your home, all the way to free and clear, amounts to that money earning you 0% in financial gain. Your home will remain a liability even when you own it free and clear. (Taxes, insurance, maintenance, utilities are all liabilities) Why not put that money into an income producing asset?