All Forum Posts by: Charlie Hardage

 Hi Mark, 

I wanted to talk to someone just looking to get into commercial. We are doing a virtual event and wanted to have someone ask a few questions to the panelists.

Hi all, I want to interview someone who is just starting out in commercial property. If you are new to real estate or new to commercial property, I would love to have a 15 minute call with you to pick your brain on mindset. 

In return, I will do my best to point you in the right direction.

@matthew adams

This strategy is 2 parts. 

#1 We use Velocity Banking. There are other methods of paying down your home sooner. You can pay more money down each month. You can pay bi-weekly, etc. With velocity banking, it puts a 'chunk' down on your home upfront (all at once). In our case, it would have taken about 7 years to pay down $50,000 in principal with our normal monthly mortgage payment. That's a long time. Instead, we put $50k down, and it took us about a year or so to pay off the HELOC.

#2 Within 1 month of putting $50k on our house, we had an additional $50k in equity. We went back to the credit union and refinanced our HELOC and took the remaining amount of credit to invest.

@Don Konipol, that's right! That's why I don't do traditional velocity banking. I invest at the same time as paying down the HELOC.

I have a HELOC I use to pay down my mortgage and invest.

@Carlos Silva

Ya, it definitely works depending on your cash flow and numbers. We started it about 3 years ago. 

Velocity banking works by taking a huge 'chunk' and putting it down on principal, then paying down the HELOC with every penny of income you get.

I will give you my numbers since we are 3 years into Velocity Banking.

Home was purchased at $410k.

Interest rate: 3.125%

30 year term

Mortgage payment is around $1950 (includes insurance and property tax)

HELOC: 8.25% Variable rate - current rate

Credit Limit: $97k

Let's say I made $10k a month and our expenses were $6k each month including the mortgage. The difference is $4k that we could put into savings, or pay down our HELOC.

If I didn't use Velocity Banking, it would take me roughly 6 years (6 years and 2 months) to pay off $50k in principal.

Using Velocity Banking, I can put $50k down immediately on the principal. I pay down the HELOC each month and would end up paying about $2,200 in interest over 13 months + the $50k principal. But I would have the HELOC paid off. By the way, if I didn't continue Velocity Banking, I would still pay off my home about 5.5 years sooner and save $30k+ in interest. Now you repeat that process until it's paid off.

Disadvantages:

It took a while for me to set up.

Bank account is always low, lol.

People can spend a lot with that amount of credit.

People think I'm weird when I tell them.

I'm happy to talk to you about it. I have a calculator that I use and can demo it. I actually go 1 step farther though and do velocity banking and investing at the same time. 

Using this method, we will have our home paid off in about 2 more years AND will have a massive HELOC we can use to scale even more.

You have a few options:

HELOCs

Home Equity Loan

Cash-out refinance

Is the rental in your dad's name and he is doing seller financing? Or did he lend you the money?

If it's in your dad's name he would need to do the HELOC, HE loan, or refinance. If it's owned outright and you are just sending him money every month, you may be able to take out a HELOC for 80% of the $150k since a lender may not know there's a loan on it.

For the STR, it's possible to get a HELOC but you would have to call around. It would be more likely you would need to refinance or get a 2nd mortgage.

 It's Fortera Credit Union based in Clarksville, TN.

Yes, I used this strategy for the apartment complexes.

I think some lenders will do 100% eventually. It isn't extremely common but its likely you will see it. It also depends on how much equity you have in your home. Some lenders do have a maximum amount.

Credit unions are usually have better terms and are more flexible than banks from my experience.

Hi Ryan,

I have used HELOCs many times to invest in apartment syndications. Great way to go! 

That being said, call more lenders! Lenders will typically offer 5-10 year draw period and a 10-20 year repayment period.

More lenders used to offer interest-only but they are mainly doing principal + interest now.

Lenders vary in their loan products and terms. I tell all of my coaching clients to call a minimum of 3 HELOC lenders, but 7 or more would be ideal.

More lenders mean more time spent for you. That also likely means more options for you to choose from.

Hope that helps.