All Forum Posts by: Josh Walker

@Kaity Pari - I am a big fan a the Home Equity Line if Credit (HELOC) as opposed to the cash out refi. The main reason that I like it is that it maximizes your cash flow and your payment decreases as you pay it down. Below, I have included some general notes I have put together for a future blog article on this topic. Happy to discuss further if you have any questions. I love this topic.

HELOC YOUR WAY TO WEALTH

Turn your house into your bank

- Can be as radical as to put your entire paycheck into your HELOC and then spend out of it (HELOC CC)

- Or put everything on a SWA CC and pay the cc off with the HELOC each month. This method gains points as well as maximizing HELOC pay down

- Find the best HELOC deal. Call a dozen or more banks. Look for a long term (10 years) before in converts to P&I, low int rate (will be variable), highest % of home (look for 90%), how long your appraisal in good for (look for 3 years) and a first year introductory rate

- pull all available funds and use them to pay down your mortgage

- Don’t worry that you need that money to live on. You are not losing access to it

- Ask your bank if they will just convert your remaining mortgage to a HELOC

- If they won’t (I would assume that they won’t) then recast your remaining mortgage to decrease your payment. Recasting your mortgage should only cost a few hundred dollars

- Add a HELOC on the remaining equity

- Pull from the HELOC and invest in a great deal

- Throw all excess cashflow at your remaining mortgage. As you pay it down, recast again and convert that equity to the HELOC. Ideally this process will not require a new appraisal (this is why you look for 3+ years)

- Over time you will work your mortgage completely into a HELOC. This is the first major milestone.

- Why is this a great milestone?

- Cash flow. Flexibility.

- Maximizing how much of your cash can work for you (you can fee more comfortable with a smaller cash emergency fund/reserves if you have access to your home equity at any time). This allows you to invest more.

- Cash flow: you have the ability to pay interest only, which is a great option when you are dealing with a curveball.

- As you pay it down, that int only payment drops as well. This is not the case with a mortgage. Your mortgage only drops when you recast it and you cannot make int only payments. This gives you added motivation to pay it off - vs. paying your mortgage down and you still have the same huge payment.

- Once your entire mortgage has been converted into a HELOC, pull as much as you can repay in 1 year and invest it in a great deal.

- This way, even without the deal, you can pay off what you drew in a year.

- After a year, do it again. But now you have the first deal added to what you can use to pay it down, so you can invest more in deal #2.

- After year 2, do it again, and so on. This creates a debt snowball that you control.

Notes

- if you have rental properties with equity, pull that equity and put it into your primary residence to pay it down and convert that amount to a HELOC

- This is significantly less risky than leaving it in rental properties. If worse comes to worse, you stop paying the mortgage on the rentals, the bank takes them, and your primary residence is even more secure.

@Julius Swolsky - I have personally invested in ~35 separate syndicated deals. I’ve also grown to establish some strong connections with some really great sponsors/GPs and helps some of them raise capital for their deals. I say it all the time - there is no such thing as a good deal with a bad sponsor.

Shoot me a PM if you would like to discuss further. I wish you luck!

@Richard Tavetian - awesome recommendations already listed. One resource I highly recommend for MHP’s is Kevin Bupp’s Mobile Home Park Investing podcast. Start at episode 1 and go straight through them. It’s outstanding.

@Joe Potenza - the ranges that @John Blanton mentioned are in line with market averages from what I am seeing. That being said, you can find the high end of that and above.

I prioritize cashflow over the projected sales proceeds. I also like to see a flat cap rate for the projected sale. I like to see a good amount of the value add coming from improved operations vs. all from increased rents.

As for the term, I’m actually getting to the point that I prefer a perpetual fund that can continue to grow indefinitely. Ideally the investor can get their investment back in a reasonable amount of time through cashflow and refi. The problem with a great deal selling is that (assuming you want to reinvest the proceeds) you have to find another great deal ... and pay capital gains tax.

I hope this helps. Wish you luck!

@Curt Bixel - someone may have already mentioned this, and if they have I apologize ... but I would highly recommend going with a custodian like eQRP.  If you invest your funds in a SDIRA into a deal that utilizes leverage you can become subject to the UBIT tax, which can be quite large.  eQRP eliminates this tax.  I have done quite a few syndicated deals within SDIRA's and eQRP is by far the best option I have seen.  

A couple of things that we have learned over time through investing and raising capital, is that there will always be good deals and there will always be capital needing to be placed. The key is finding great sponsors/GP's.  I say it often, but there is no such thing as a good deal with a bad sponsor.  

@Wade Calvert - as a few folks have already hit on, a lot of this comes down to how involved do you want to be/can you be.  I have personally elected to go the route of investing in syndications as well as helping some of my favorite sponsors raise capital.  I look at this similar to hiring someone to fill a position at a company.  Do a ton of due diligence up front.  Get to know the sponsors/GP's. Once you are comfortable, let them do what they do.  I have personally invested in more than 30 syndications and love discussing this process with those interested in learning about it.  Feel free to shoot me a PM if you would like to discuss further.

I wish you luck!

I agree with @Andrea Weule. I have personally invested the vast majority of my IRA funds into syndicated deals and love that option. Just make sure you fully vet the sponsors (GP). There is no such thing as a good deal with a bad sponsor.

@Alex Palma - I have personally invested in over 30 syndications and believe that they are a great option. I have invested in a number of different asset types, markets and with a number of different sponsors. I love discussing syndications with anyone interested.

Feel free to shoot me a PM if you would like to discuss further. I wish you luck.

@Walter H. - was be seen anywhere from 3 - 10 years for a term. Once the term is up it just converts to a principal and interest payment. You can always just refi before that point if it still has money drawn on it.