Using Home Equity Loan

[rmathome]

Is it me or this CRAZY!?!

I have a home, a wife and three kids.

I am doing everything I can to get the money I need but the thouht of a home equity loan seems crazy.

Would anyone out there take even a 1 in million chance of putting his family on the street?

[laundryboy]

Absolutly. Although, if it is a million in one chance that your venture will SUSSEED, why even think about it if you had the cash?

[pete f]

I use my home equity like a revolving account, done many deals off it, and at the best interest rate. If it goes bust> why worry, I just move into one of my other houses. I learned something from a successful businessman many years ago, he owned a small trucking company in northern Maine,.#1 It takes money to make money. #2, borrow against your CD's, not the banks money. #3 it is easier to get money from a bank when you do not need it (* this refers to backing it up with CD's or fed notes) To quote Trump after he come out of near bankruptcies years ago.. " cash is King"

[rmathome]

Pete, I dont get it. Im confused by your post.

"If it goes bust why worry, I just move into one of my other houses." is that a joke or do you really not have to worry about it. I guess if I had a second house I wouldnt think twice against borrowing against it.

"borrow against your CD's, not the banks money." Canyou explain this?

"it is easier to get money from a bank when you do not need it" Why would you get it if you dont need it? And why is it easier?

[seflaundry]

I used my home equity loan to buy my Mat.
It is basically the samething as cash. You invest it the same way and it will hurt if its lost. Regardless of where the money comes from you should invest it wisely.
HELOC is a nice tax write-off.
If you find a good deal then tap the equity and go for it!!
Good luck!!!

[rmathome]

But if you cant make the payments, you could lose your house. I know this is a risk/reward thing... but it just seems like no risk is enough to leave my family without thier home.

Am I missing something?

[seflaundry]

I think it all comes down to dedication and a little luck.
IF things go really bad with the MAT you will have to get a part time job to make that payment... Where there is a will there is a way.

[laundryboy]

I think you are missing one huge point and you made refernce to it. "If I can't make the payment ...." If you are that concerned with the leverage ratio you can do a couple things 1) Put more cash in upfront (borrow less). 2) reduce the amount YOU are willing to pay for the opportunity. 3) find a partner (not something I would recommend).

You can always try for some owner financing. This will tell you a couple things 1) Confidence in the sellor that THEY believe the business will support the payment to THEM. 2) The numbers the sellor preneted should be accurate.

[pete f]

Pete, I dont get it. Im confused by your post.

"If it goes bust why worry, I just move into one of my other houses." is that a joke or do you really not have to worry about it. I guess if I had a second house I wouldnt think twice against borrowing against it.

RISK and REWARD, I try to shop very carfully, all deals must make absolute sense. Yes, I could loose my house. If you feel strong enough about the deal there should be no risk. If you feel risk then the deal is no good. I do happen to have a couple more houses I could move into, maybe you should look into owning more real estate first.

"borrow against your CD's, not the banks money." Canyou explain this?

It is called SAVING UP MONEY. That is how I have the houses, mats and other stuff. I forgo the new cars and clothes when I was younger and invested my savings. I really am bad for the big ticket economy. When you have bank CDs you can borrow against them very cheap. Why not just cash them. Maybe tax reasons. I borrowed against my stock account for years, it was cheaper to pay the margin interest and deduct it on my taxes then sell the stock and pay capital gains. Plus the stocks went up.

"it is easier to get money from a bank when you do not need it" Why would you get it if you dont need it? And why is it easier?

You go apply for a home equity when you do not need it, ie, have little debt, good income, etc. Then you have capital at your disposal to act on a deal. Go to bank when you are loaded with debt and marginal income see how quick they pass the money to you. The more assests and net worth you have the faster they try to give money to you becuase you have proved you can handle the finances.

It is not easy, but like the squirrel you will be resting easy in the years to come after storing up the nuts.

[ericnyc]

I use my home equity like a revolving account, done many deals off it, and at the best interest rate. If it goes bust> why worry, I just move into one of my other houses. I learned something from a successful businessman many years ago, he owned a small trucking company in northern Maine,.#1 It takes money to make money. #2, borrow against your CD's, not the banks money. #3 it is easier to get money from a bank when you do not need it (* this refers to backing it up with CD's or fed notes) To quote Trump after he come out of near bankruptcies years ago.. " cash is King"


Pete,

Can you please clarify
"#2, borrow against your CD's, not the banks money"

Also, from experience will sellers provide financing without personal guarantee?

[Aromaz]

Also, from experience will sellers provide financing without personal guarantee?

Would you?

[pete f]

Pete,

Can you please clarify
"#2, borrow against your CD's, not the banks money"

Also, from experience will sellers provide financing without personal guarantee?


This is simple, you have 100k in CD at your bank, you need 50k to do a deal , they loan you back your money at a discount.

As for any seller, including me, I always require a personal guarantee. Corps, LLC's, ect are just for slip and fall lawsuits. As with any bank,. the real buyer must sign on the line.

[ericnyc]

This is simple, you have 100k in CD at your bank, you need 50k to do a deal , they loan you back your money at a discount.

As for any seller, including me, I always require a personal guarantee. Corps, LLC's, ect are just for slip and fall lawsuits. As with any bank,. the real buyer must sign on the line.

But wouldn't it be easier to just take the money out of CD?

Also, several books i read say to get owner financing rather than bank financing and do not personally guarantee the loan. Not sure if this works in reality.

[E&R]

Pete, what are the tax consequences in using HELOC? My understanding is the tax write-off for HELOC is only good for up to $100K. If you're not using the HELOC for home improvement, Alternative Minimal Tax kicks in and there goes your tax write-off.

[Coinwash]

For members who don't no what HELOC is. Here is a link ;)


http://www.mtgprofessor.com/A%20-%20Second%20Mortgages/what_is_a_heloc.htm

http://www.mortgageloan.com/calculator/home-equity-line-of-credit-calculator

java is needed on second link

[pete f]

Pete, what are the tax consequences in using HELOC? My understanding is the tax write-off for HELOC is only good for up to $100K. If you're not using the HELOC for home improvement, Alternative Minimal Tax kicks in and there goes your tax write-off.

It is all business to me, so I ignore what ever the homeowner rules are. My business takes the interest deduction, not me. It is flow thru financing.

[Kitty]

Who ever you do business with will want to know you will repay, this is what the personal guarentee refers to. It merely means you agree to pay what you borrow.

[pete f]

But wouldn't it be easier to just take the money out of CD?

Also, several books i read say to get owner financing rather than bank financing and do not personally guarantee the loan. Not sure if this works in reality.

Most CD's have early withdrawl penalties, new ones now are flex so you can take out what you want when you want with no penalty. It was in the old days I knew a very successful man who told me the CD thing.

I do not know any smart seller who would sell and not get a personal if the buyer was a corp or LLC. I use a lawyer for all my closings, he prepares the documents for the personal guarentee