All Forum Posts by: Axel Meierhoefer

@Tony H, I would like to see your spreadsheets. You would have to invent new math to make a regular mortgage come out to be the better deal.

@Peter S. I am sorry, but what you are saying is: Follow the lemmings off the cliff - its' what everybody does. I agree that paying the fees is not necessary but you can't deny the validity of the math. You might save someone $2500. On a $350K mortgage a HELOC approach saves $200K compared to a mortgage. That's worth taking a closer look at rather than deciding emotionally.

@Brent C. You are right. On the other hand the mortgage will only do amortization interest calculations once/month and your HELOC works on daily average interest and gives you the in/out flexibility. If you have a house for some time and have paid a lot of these extra payments, lets say you have $200K in equity due to your extra payments, unless you live in it yourself, the bank will give you no more than 20% or $40K. The rest of the equity is just sitting in place. In case you had done the same deal with the same payments in HELOC, you could use $200K any day and make it work for you.

@Charles C. Thanks for your post. That's what I am doing as well. I know there is such a thing like analysis - paralysis, but having a good understanding of options and then applying what works best is a great approach. I have always been disciplined with money - ergo HELOC works for me

Coming back to the original question I believe the following:

• The math used for HELOC calculations is sound and the main benefit lies in daily interest calculations on the remaining balance combined with the fact that any unused monthly income lowers the balance of the loan amount
• To make the strategy work one needs to be disciplined. If that is the case amazing flexibility is available, especially for real estate investment opportunities
• Many posters caution about the ability of the bank to call on the loan. The same posters advocate for a regular mortgage with possibly extra principle payments. That means the assumption is that a person would qualify in the first place. Should a HELOC really be called, that same person would instantly qualify for a regular mortgage, everything else remaining equal - so this is a very theoretical risk (besides the fact that banks don't normally call lines of credit that are being served regularly. If you are getting flagged and considered to have your line called, you have probably given the bank a reason. Otherwise you are not important enough to them to even be considered. We love to believe that the banks see as as a customer in human form but that is not true. we are numbers in spreadsheets that have to perform against expectations. If you do, you don't get flagged.
• I believe research is valuable and should be rewarded but the main value in Michael Lusts program is the bank list. The price is pretty steep for that. One can find lenders and apply criteria freely available to negotiate a good deal.
• As I am getting deeper and deeper into the topic of real estate investing, I appreciate people whoa re willing to find creative ways to achieve goals. Bankers and media have conditioned us to look at mortgage first even though the math clearly indicates that other tools have faster, better priced outcomes

Adam, I agree with Andrew. It's a large deal for the first time. One other thing I like to contribute: If you are saying its $150K in renovations, I would suggest to be prepared to ultimately end up with $175K, maybe even more. Renovations are hard to estimate and in a large project a 10-20% overrun due to unexpected discoveries and expenses is not uncommon.

Moire details would have to be known to really help more but it sure is brave to consider this one as your first.

Thanks Jay

I hear you and I am actually looking between $70K - $150K

Some people outside of BP suggested the Davenport, IA, area. Any thoughts?

If it were me I would rent out the house in Indiana too but before doing that I would probably see if it is possible to get a HELOC on it. If you get 80%, that gives you $80K for investments in Indiana. Based on what I have seen you could probably get 3-4 places that would cash-flow you another $1000/month and you are building equity over time. Your dad would not only help you increase cashflow but also allow you to create a growing inheritance.

For the property management question I would suggest to take a look at David Green's book about out of state investing and listen to the two podcasts on BP with him.  

Thanks Ian. I am looking for single family residences right now

Andrew. I totally agree. Currently reading David Green's book and he also puts the emphasis on the team rather than the location. Dan, we should meet and discuss. CA, although I have two properties is just to high a hurdle of entry of me.

Thanks Rick

thanks guys

I appreciate your wisdom 

TX has gotten pretty appealing since I started searching.

I will keep it on my list. Sadly I don’t know anyone for a core-4 team and would have to start anew or use turnkey.

Axel