You are one of my favorite gurus on the subject! I closed on my first commercial real estate purchase on 06/28/2024. Yesterday, I entered escrow on a residential short term rental property, and I’m currently in negotiations for a long term rental property. My next one I may employ creative financing utilizing subject-to. Thank you for teaching us priceless techniques and investment strategies.
Peter, what you teach is very true. I did this myself starting with 60K 10 years ago, and now selling for 1.9M. If I had people like you teaching me the right way my profit would have easily been doubled. Knowledge is everything.
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1M - existing loan $300k=$700k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
This is a great info on Equity. Very well explained but you all need to remember. The interest rate is very high above 8.5% so leave it alone for now till it goes bellow 4.5% then you could use the equity
It will only work if the cap rate is higher than the interest rate. Here in Houston Texas, shopping center are selling a cap rate of 7.0 to 7.5. Prime rate is 8. Borrow money is prime plus a margin, think how you make money? Own three shopping center clean and clear since May 2020. I have yet to find any shopping center to buy that makes cents. When cap rate is that much lower than the interest rate, it kills the real estate market, unless you get into it to lose money.
Also he needs to stress that USING the equity means the total loan is now $600,000 and not $300,000 so the monthly payment will be extreme compared to what you were just paying. Instead of approx $1700 on a 4% loan monthly it will be over $3k. Plus the bank will update the interest. Also he needs to stress that a HELOC is like giving you a Credit Card with $300k on it at whatever the rate is 14% right now I think and you have just used your home as collateral so you are in a world of hurt either way.
Thank you Peter, we have a new home we bought with cash (no mortgage), and am interested in creating a monthly cash flow so I don't have to work til i die! I am 76 and want to do other things now, so I will be in touch with you soon. Thanks and have a Blessed day!
Cover $600 HELOC cost through investment property cash flow ? WOW I’d have to find a diamond in the rough. Thanks for being transparent. Great content.
This makes more sense than any other video I have watched. Great video. You just picked up a subscriber. Keep up the good work by educating people on ways to make HELOC work for you.
Was Beginning to make moves when I bought my first home 4 yrs ago, then divorce has nearly Hamstrung my progress. Thx for your information on this subject matter.. 🎉
Great video! Quick note: when cashing out you don’t take 75% of equity , you go to 75% of homes value on the cash out. In your example you had new loan amount of $600k on $700k value.
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
@@MattTheMortgageGuy We all know the basic that's all require veriable income. My real Q is is there any loan that does NOT look at the income? Even at higher interest like 10%-12% HELOC is ok as long as no income verify and within 1 yr I can use the funds to finish remodel and then rent it out to pay off all loan fast! Just need to find a way to UN-TAP (get $ from) the $525k equity just sits there (for your eyes only but cannot use is what a wasteful resource, sad), pls help! My parents against me to sell it for 1031exchange and my sis wants portion of the proceeds and thus also against to sell it. HELOC is like a credit card, I may not need $525k that much but if the HELOC has more than $100k for quick remodel is ok but make sure no income require...
I see a bunch of people in these comments don’t understand the paradigm shift that can occur when using debt to your advantage as opposed to acquiring retail debt etc… seek knowledge in an accepting manner.
Peter, this video breaks down the process in a simple easy to understand manner which is the best I have experienced over the several years in Real Estate investing. Thank you for the information. You're Awesome!
Hi Peter. This is a great video with examples. However, I have some issues with the monthly cashflow. You had projected the monthly cash flow of approx $1800/month after paying the mortgage payment, Heloc interest-only payment, Insurance, maintenance, etc. However, we also need to account for the costs of a property management company to manage those 12 units. I am estimating a PMI of $600/per month which would bring down the cashflow to $1200/month which is quite less for a 12 unit Apartment complex. I should be able to make a cashflow of atleast $400/unit after all expenses. Additionally with regards to Heloc,you had estimated a Heloc interest of $2000/ month for Heloc, which is interest only, fluctuating rate based on Fedrate. The interest payment can go up depending on the Fed rates. What strategy do you propose to pay off the HELOC?
It's a great advice. You can ask for 50k or 100k and use that money to pay your mortgage. If your mortgage is $1,200 a month with that money send $2,000 a month and you will be debt free in couples of years.
This's the best and most simplest explanation i have seen so far on how to use equity on real estate. I believe you can deduct the rental cost vacancy as an expense.. On a side note, i read somewhere that 90% real estate investors lose money when everything is factored in, including sweat equity.
Where did you read that? Real estate is the greatest investment vehicle on earth. You get appreciation, depreciation and income, all at the same time. There is no other investment on the planet that gives you that. None. Sure, you can go wrong by buying incorrectly, but that's why its best to hire expert consultants to help you.
@@CommercialPropertyAdvisors 80% of these comments are from a robot. If the username as a series of numbers at the end, its most like not a real person. Just FYI!
@@adamnonnenmacher7774 Thanks for the tip. What's crazy is that many of those comments from the "series-of-numbers" commenters are actually very real-sounding questions and comments! They don't seem like AI. But then again, that's what makes AI so concerning these days.
@@CommercialPropertyAdvisors I noticed that too but my name got numbers after it also. I think it may be a dash and some numbers. Hard to tell. Easy to tell if they immediately start talking about i have an agent, oh, who is that?, its so-and-so, the best, wow, thanks, i'll contact them... Annoying. Thanks for the video. As you said, buying correctly is what really makes or breaks it.
By taking out a home equity loan you could risk losing your home: Since your home is required as collateral, you risk losing it to foreclosure if you fail to make your payments on a home equity loan. High equity and credit score requirements: If you don't have at least 20% equity in your home or a good credit score, you may not qualify. Tapping into equity increases your overall debt and what you will owe your lender - both in principal and interest. The best way to buy property is by getting together with investors. Form you own investment group where people come together that have cash that they are looking for opportunities to invest and buy either rental properties where the structure is there or land than can be built on. Your personal home should not be touched it’s your safety net.
When you said equity can be obtained tax free it would have been proper to tell people it is tax free it is not interest free. A person might make income using their equity but maybe only for the banks. Losing closing costs paying more insurance and risking everything. I could only see using equity for real estate investments when the market is suitable and interests are low, very low.
@@wheelie642 Sure, borrowing money is not interest-free, but interest is not the enemy. It's the cost of borrowing money. But if you borrow money at 7% but get a return on that money of 20%, then you are MAKING 13% per year from that equity! Banks are not the winners in this equation; smart real estate investors are. It's a paradigm shift in the minds of many people to understand the power of borrowing money wisely.
What about equity sharing vs all these methods? If something happens and you can't make the payments you are risk of being homeless and losing your property to after paying all your life paying down the mortgage anything can happen in the market bad tenants rent control etc etc this is not exactly high interest vs etc or even S&P with an historical good rate. They all have risk and payments!
I did a small HELOC. I am paying on the interest for 10 years before it starts actually coming off the the loan. Thought it was kinda like a regular loan. Stupid me. That's what i get for not reading 20 pages of fine print.
That's not an issue if you invest those funds wisely. Interest-only loans are used by smart real estate investors all of the time. It can be a HUGE advantage because you don't have to pay down principle. Paying down your loan shouldn't be your goal. Your goal should be to maximize the profits you can earn from the money you borrowed.
If you did a HELOC you need to use that HELOC in place of your checking account which will ALWAYS satisfy the monthly HELOC payment as it decreases. Peter did not discuss this. He talks about using those funds to buy commercial property If your not there currently, direct deposit your income into the HELOC. Pay expenses out of the HELOC with the provided debit card, increasing your credit score and freeing cash flow as your bills are paid off. You should be debt free before investing into commercial property unless you have a great deal on the table
Thank you for breaking down what I have been playing around with in my head for a while. Very informative video. I would like to play with the numbers more is I was investing in a 20 unit apt. building instead of a 12 unit.
Brother, you are the best. I wish I had met you 24 years, ago. I would have been rich, now. I would not have made the mistake I did. I am paying for my ignorance and total lack of financial and real mortgage understanding, even though I actually had a real estate license and a mortgage broker certification, with which I've done nothing serious.
@@damme91 And with commercial real estate, you can make a net cashflow AND get a tax deduction. Learn more here: www.commercialpropertyadvisors.com/tax-advantages-of-commercial-real-estate/
@@TheEmperorXaviergo to both and if you have 50 percent of the purchase price, someone will sell you a property. Also with 500k investment you can become a resident.
It depends. For those with good credit, easily verifiable income and a low debt to income ratio, it's extremely easy. For those with bad credit, hard-to-verify income and a high debt to income ratio, it's difficult.
Does warren buffett don’t work anymore? It’s nice to have more money n more holidays, but everyone has to work all their lives.. nice video .. appreciation.
Hello when you take equity and go for commercial property .after put the equity money on the down payment do you have to take 2nd mortgage for pay the commercial property or just the down payment make you have the commercial property.
You will have three loans: a primary home loan, a HELOC loan, and an investment property loan. Your goal is to have your tenants pay all of the costs associated with the investment property.
Are you asking for advice on buying a home as a first time home buyer? If so, we teach how to invest in commercial real estate. There are other experts out there that help you navigate through buying a home, such as th-cam.com/video/IomfI_iF4EM/w-d-xo.html
This video covered everything except the downside of every real estate investment. As the old saying goes, the grass is always greener on the other side of the fence.
Do you have a video on how to find off market investment properties? My equity scenario matches your example to a T but I’m in California so I would need to get an investment property outside of CA (too expensive here). Thank you.
I thought I would keep my current loan + I will have another loan ( the HELOC) to pay. The current interest rate on my loan is 3.175 %. I don't want to borrow 50K and get a new loan with a higher interest rate. My other question would be: what is better: a HELOC or a Home Equity Loan?
If you have a loan with a very low interest rate, you may want to keep the loan and just use a HELOC. But if your loan interest rate can be improved upon, then consider getting home equity loan.
@@CommercialPropertyAdvisors Thank you so much. I appreciate the time you took to answer. I wish you health and happiness, success you already have it❤️❤️
My current mortgage rate is only 1.99 and I have tons of equity. What is the HELOC interest rate? I'm considering using some funds to make my home more energy-efficient for long-term savings. Would love to hear some feedback thank you
He means Don’t wait no more if you wait longer prices will be higher on properties Ok. Sample I bought a house (fixer upper) $106,000. Back in 1996 in Oxnard California, now it’s worth $889,000. I refinance one time 1999 will pay it off in less than 5 years. Picture owning two properties or more, you are a millionaire. Take care and start investing, good luck. Happy holidays.
We had an inheritance about 3 years ago. It was enough to buy a house cash in Hawaii. House was 100 years old but had loads of potential. Weve resided here for over 2 years and are looking to get cash out to either build a rental at rear of property or find another home in the neighborhood to live in and fix up, what would you reccomend?
Actually, lenders will typically only give you a HELOC for 75-80% of the appraised value of the property. So if you have a loan for 300k on a home worth 700k, then you can only get 225k out typically so the total does not exceed 75-80% LTV. You do not get to have 75% of the equity, you get 75% of the value.
And some Credit Unions will actually allow up to 95% LTV (although that is not recommended because keeping some equity is helpful in case of emergency and having to sell your house quick)
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
Don't do them. Use that equity to acquire real estate, hire good management, and get ALL the benefits; cashflow, tax deductions and equity build up; rather than turning your equity into just a small amount of income.
The way a HELOC works is as follows: Home price $700K 75% of $700K is $525K Therefore $525K (75% of the FMV) minus $300K owed = $225K available on the HELOC
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
@@Ngan-zy9kd I know for sure that when applying for a First Lien HELOC, they qualify you just like a regular mortgage will. I'm not sure about Second Position HELOCs
@@weinvestcambiandomentalida2629 In short, your Answer means THE Y WILL QUALIFY U BASED ON INCOME (verifiable income), right? I'm looking for any loan/HELOC without income verify (no doc, mostly based on the value of the R.E has $1M equity and only wanna borrow HELOC like around $300k.FMV of the home should exceed $1.3m, - $300k 1s mortgage loan=equality is $1M, and only want to tap into 1st HELOC borrow out $300k or $200k for rehab, but property is vacant no income and awaits for rehab. Thanks!
hold on....regardless of your home equity amount, you still need enough income to repay the heloc. I may be mistaken but $85K annual income is not enough to pay back $950K in uequity
@@reneemaricheau4150 that would put me in a better cash position BUT I would have to pay tax on the added income and it would not necessarily count as an income source when qualifying for the HELOC
Is 13.2% rental yield common in the US? ie 13200 rental income for a 1 mil apartment building! I would imagine a more realistic 7%-8% in which case the end result would not be pretty
So I have a house with mortgage of 750k and 400k in equity, I take a loan or line o credit for 300k to buy a second house, now in the short term I have to pay the mortgage for 750K, line of credit for 300K and the second property would pay itself hopping it gets rented 100% until it increases its value, probably 5 to 10 years later, while I am paying two mortgages (maybe three)
You can't take depreciation deductions on your primary residence; only on rental properties. If you acquire another rental property (thanks to your HELOC on your free and clear primary residence), then you can accelerate some of the depreciation using a cost seg, as explained here: www.commercialpropertyadvisors.com/cost-segregation-made-simple/
One important thing not mentioned here is getting an approval for the mortgage on the new investment property. A bank is not going to just give you a $700,000 mortgage as stated in your example when you already have a mortgage of $300,000 on your primary and a $300,000 HELOC on top of it unless you can income qualify. Twenty years ago you could’ve done this with a handshake and stated income but not today.
The key is finding the “deal”. When I crunch the numbers in today’s market, there is no room for positive cash flow unless you have a large down payment. Pulling money out of your prior real estate investment sounds good but again that all depends on the purchase price of your new investment and the available cash to put down. It’s not impossible but you have to find someone that is desperate to get out of their current real estate. Perhaps they bought high and can not maintain the expense of the property. Idk, I’m still looking..
I want to use the equity in my home to travel. I have no mortgage. I am 81 years old and I want to travel on cruise ships one trip per year, for about $20K. I want the longest re-payment period and lowest interest rate. I would prefer repayments after I pass on, from sale of property. My home value is far below 'reverse mortgage' requirements or so they tell me.
We paid off our house a few years ago, and now that we’re nearing retirement, it feels like a missed opportunity to let all that equity just sit there.
Yea, I wouldn't regret it if I were you. Beware the devil is in the details. I was a realtor I can't tell you how many 'investors' came to me to buy income property. They think the sales prices of real estate is ripe with rental income and the seller doesn't know what he has.. Don't buy it! pun intended. The payoff is long term. The seller marks up the price making it a long time before you make profits. In the mean time you deal with renters failing to pay, evictions and people causing property damage that you will never recoup and your loss of peace and sanity. The only winner is the bank collecting interest.
@@wheelie642 You, as the Buyer, have the power to find off-market deals and negotiation purchase prices that are low enough such that you, as the Buyer, are the winner from the very start. Sure, brokers may try to convince you to buy bad deals, but you have the authority not to "buy" into their persuasion. You make your money when you buy. And meanwhile, banks are not the winners, smart real estate investors are.
Every successful commercial real estate investor has a mentor. Get your mentor here: www.commercialpropertyadvisors.com/protege-program/
You are one of my favorite gurus on the subject! I closed on my first commercial real estate purchase on 06/28/2024. Yesterday, I entered escrow on a residential short term rental property, and I’m currently in negotiations for a long term rental property. My next one I may employ creative financing utilizing subject-to. Thank you for teaching us priceless techniques and investment strategies.
I am trying to learn. I sent a txt and signed up for mentor about a week ago. I never got a response.
@@senecacooper8049 We currently do not provide services in the state of New York
Do you provide services in NJ? Thx
@@CommercialPropertyAdvisorsyour thoughts on reverse mortgage?
Peter, what you teach is very true. I did this myself starting with 60K 10 years ago, and now selling for 1.9M. If I had people like you teaching me the right way my profit would have easily been doubled. Knowledge is everything.
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1M - existing loan $300k=$700k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
You’re not alone.
This is a great info on Equity. Very well explained but you all need to remember. The interest rate is very high above 8.5% so leave it alone for now till it goes bellow 4.5% then you could use the equity
Exactly
It will only work if the cap rate is higher than the interest rate. Here in Houston Texas, shopping center are selling a cap rate of 7.0 to 7.5. Prime rate is 8. Borrow money is prime plus a margin, think how you make money? Own three shopping center clean and clear since May 2020. I have yet to find any shopping center to buy that makes cents. When cap rate is that much lower than the interest rate, it kills the real estate market, unless you get into it to lose money.
Also he needs to stress that USING the equity means the total loan is now $600,000 and not $300,000 so the monthly payment will be extreme compared to what you were just paying. Instead of approx $1700 on a 4% loan monthly it will be over $3k. Plus the bank will update the interest.
Also he needs to stress that a HELOC is like giving you a Credit Card with $300k on it at whatever the rate is 14% right now I think and you have just used your home as collateral so you are in a world of hurt either way.
I agree
@@clown192He did. The white board clearly says mortgage (7%) and Heloc(2k/month). Clown.
Love this guys voice. It's very comforting...
Peter you were a great teacher, the problem is most people are afraid to take a risk. I have 13 units, and always looking to buy more.
Thank you Peter, we have a new home we bought with cash (no mortgage), and am interested in creating a monthly cash flow so I don't have to work til i die! I am 76 and want to do other things now, so I will be in touch with you soon. Thanks and have a Blessed day!
You answer many of my questions without looking or asking about it.
Excellent class!!!
Thank you, Sir.
Glad it was helpful!
Cover $600 HELOC cost through investment property cash flow ? WOW I’d have to find a diamond in the rough. Thanks for being transparent. Great content.
Great point. You definitely need to find a diamond in the rough. It's one the keys to this technique.
This makes more sense than any other video I have watched. Great video. You just picked up a subscriber. Keep up the good work by educating people on ways to make HELOC work for you.
Peter YOU ARE AMAZING AND APPRECIATED!! THANK YOU FOR CARING AND HELPING ALL OF US WHO ARE PASSIONATE ABOUT REAL ESTATE 😊❤️🙏🏼 God Bless YOU!!!
Amen 🙏 ❤
Was Beginning to make moves when I bought my first home 4 yrs ago, then divorce has nearly Hamstrung my progress. Thx for your information on this subject matter.. 🎉
This was a great video. Peter you did a great job of breaking down the process in bite sized easy to understand pieces. I’m a new subscriber now.
First video on your channel and I’m subbing! Beautifully explained! Thank you 🙏
.Im starting the process of buying my own building for my auto repair shop. This is very helpful
Great video! Quick note: when cashing out you don’t take 75% of equity , you go to 75% of homes value on the cash out. In your example you had new loan amount of $600k on $700k value.
Thanks for sharing.
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
yeah- for conventional loan you’ll need verifiable income to do cash out refi
@@MattTheMortgageGuy We all know the basic that's all require veriable income. My real Q is is there any loan that does NOT look at the income? Even at higher interest like 10%-12% HELOC is ok as long as no income verify and within 1 yr I can use the funds to finish remodel and then rent it out to pay off all loan fast! Just need to find a way to UN-TAP (get $ from) the $525k equity just sits there (for your eyes only but cannot use is what a wasteful resource, sad), pls help! My parents against me to sell it for 1031exchange and my sis wants portion of the proceeds and thus also against to sell it. HELOC is like a credit card, I may not need $525k that much but if the HELOC has more than $100k for quick remodel is ok but make sure no income require...
Thanks for that information
I see a bunch of people in these comments don’t understand the paradigm shift that can occur when using debt to your advantage as opposed to acquiring retail debt etc… seek knowledge in an accepting manner.
Amen!
That’s because they haven’t learned the difference between assets and liabilities.
Peter, this video breaks down the process in a simple easy to understand manner which is the best I have experienced over the several years in Real Estate investing. Thank you for the information. You're Awesome!
You are very welcome! Thank you for commenting.
Thanks for sharing this information, Peter. I wish I had known it earlier , but it's not too late.
Hi Peter. This is a great video with examples. However, I have some issues with the monthly cashflow. You had projected the monthly cash flow of approx $1800/month after paying the mortgage payment, Heloc interest-only payment, Insurance, maintenance, etc. However, we also need to account for the costs of a property management company to manage those 12 units. I am estimating a PMI of $600/per month which would bring down the cashflow to $1200/month which is quite less for a 12 unit Apartment complex. I should be able to make a cashflow of atleast $400/unit after all expenses.
Additionally with regards to Heloc,you had estimated a Heloc interest of $2000/ month for Heloc, which is interest only, fluctuating rate based on Fedrate. The interest payment can go up depending on the Fed rates. What strategy do you propose to pay off the HELOC?
Thank you for sharing your educational content with the TH-cam community. 🤝
My pleasure!
Thank you for this goldmine of information. Your videos are always on point and no unnecessary details.
Thank you for watching!
It's a great advice. You can ask for 50k or 100k and use that money to pay your mortgage. If your mortgage is $1,200 a month with that money send $2,000 a month and you will be debt free in couples of years.
This's the best and most simplest explanation i have seen so far on how to use equity on real estate.
I believe you can deduct the rental cost vacancy as an expense..
On a side note, i read somewhere that 90% real estate investors lose money when everything is factored in, including sweat equity.
Where did you read that? Real estate is the greatest investment vehicle on earth. You get appreciation, depreciation and income, all at the same time. There is no other investment on the planet that gives you that. None. Sure, you can go wrong by buying incorrectly, but that's why its best to hire expert consultants to help you.
@@CommercialPropertyAdvisors 80% of these comments are from a robot. If the username as a series of numbers at the end, its most like not a real person. Just FYI!
@@adamnonnenmacher7774 Thanks for the tip. What's crazy is that many of those comments from the "series-of-numbers" commenters are actually very real-sounding questions and comments! They don't seem like AI. But then again, that's what makes AI so concerning these days.
@@CommercialPropertyAdvisors I noticed that too but my name got numbers after it also. I think it may be a dash and some numbers. Hard to tell. Easy to tell if they immediately start talking about i have an agent, oh, who is that?, its so-and-so, the best, wow, thanks, i'll contact them... Annoying. Thanks for the video. As you said, buying correctly is what really makes or breaks it.
By taking out a home equity loan you could risk losing your home: Since your home is required as collateral, you risk losing it to foreclosure if you fail to make your payments on a home equity loan. High equity and credit score requirements: If you don't have at least 20% equity in your home or a good credit score, you may not qualify. Tapping into equity increases your overall debt and what you will owe your lender - both in principal and interest. The best way to buy property is by getting together with investors. Form you own investment group where people come together that have cash that they are looking for opportunities to invest and buy either rental properties where the structure is there or land than can be built on. Your personal home should not be touched it’s your safety net.
Remember my words of wisdom at the beginning of the video, "Learn to use it properly or leave it alone!"
When you said equity can be obtained tax free it would have been proper to tell people it is tax free it is not interest free.
A person might make income using their equity but maybe only for the banks. Losing closing costs paying more insurance and risking everything. I could only see using equity for real estate investments when the market is suitable and interests are low, very low.
@@wheelie642 Sure, borrowing money is not interest-free, but interest is not the enemy. It's the cost of borrowing money. But if you borrow money at 7% but get a return on that money of 20%, then you are MAKING 13% per year from that equity! Banks are not the winners in this equation; smart real estate investors are. It's a paradigm shift in the minds of many people to understand the power of borrowing money wisely.
What about equity sharing vs all these methods? If something happens and you can't make the payments you are risk of being homeless and losing your property to after paying all your life paying down the mortgage anything can happen in the market bad tenants rent control etc etc this is not exactly high interest vs etc or even S&P with an historical good rate. They all have risk and payments!
What a great teacher!! I learn so much from you!!
Thank you very much! Happy to help.
VERY well made video, thank you! Sooo helpful!!!
I did a small HELOC. I am paying on the interest for 10 years before it starts actually coming off the the loan. Thought it was kinda like a regular loan. Stupid me. That's what i get for not reading 20 pages of fine print.
That's not an issue if you invest those funds wisely. Interest-only loans are used by smart real estate investors all of the time. It can be a HUGE advantage because you don't have to pay down principle. Paying down your loan shouldn't be your goal. Your goal should be to maximize the profits you can earn from the money you borrowed.
If you did a HELOC you need to use that HELOC in place of your checking account which will ALWAYS satisfy the monthly HELOC payment as it decreases. Peter did not discuss this. He talks about using those funds to buy commercial property
If your not there currently, direct deposit your income into the HELOC. Pay expenses out of the HELOC with the provided debit card, increasing your credit score and freeing cash flow as your bills are paid off. You should be debt free before investing into commercial property unless you have a great deal on the table
You broke that down perfectly. Thank you>
good teacher-many Thanks!
Thank you for breaking down what I have been playing around with in my head for a while. Very informative video. I would like to play with the numbers more is I was investing in a 20 unit apt. building instead of a 12 unit.
When you increase the loan. How you going to pay it.
Brother, you are the best. I wish I had met you 24 years, ago. I would have been rich, now. I would not have made the mistake I did. I am paying for my ignorance and total lack of financial and real mortgage understanding, even though I actually had a real estate license and a mortgage broker certification, with which I've done nothing serious.
No guarantees in life .. enjoy life on the go .. health is also our wealth
The best time to buy commercial real estate was 5 years ago. The next best time is today!
I think real estate benefits (especially with taxes) definitely outweigh those of stocks. This is tremendous knowledge!
Especially on days like yesterday! Real estate doesn't change rapidly like that.
If you have an isa you don't pay tax on stocks. I can't see much income coming from rental property now with all the extra costs now
@@damme91 And with commercial real estate, you can make a net cashflow AND get a tax deduction. Learn more here: www.commercialpropertyadvisors.com/tax-advantages-of-commercial-real-estate/
Thank you Peter for this million dollar advice
You're welcome! Thanks for watching!
Thank you Peter.
No risk,no reward!👍🏻✌🏻
Although I would prefer to say that you can have great Rewards with very limited Risks when you know what you are doing.
Do you have to pay back your heloc on your current investment before you use the gained equity for a new investment property?
It’s very interesting Video that I found today. Before taking a 1st step, it required a lots of calculation and thinking…😊
Like Henry Ford said, "Thinking is the hardest work there is, which is why so few people do it."
What about when the rates change on the heloc. What is the average time before you can pay back the heloc
Typically, the refinance of the multifamily property is 3 years. Usually, HELOC interest rates stay fixed for 10 years. Plenty of time!
Thank you soo much for this. I learned a lot. Question, is your mentorship available for no-US students
We only mentor in the US and Canada
@@CommercialPropertyAdvisors I am interested in the real estate market in both mentioned places. Will I qualify?
Do you live in the US or Canada?
@@CommercialPropertyAdvisors No I do not, but I am interested in real estate purchasing in the US or Canada
@@TheEmperorXaviergo to both and if you have 50 percent of the purchase price, someone will sell you a property. Also with 500k investment you can become a resident.
You have good hand writing.
Great video !! Beautiful and total breakdown !! 🏁
Glad you liked it!
Great video. Subscribed.
Quick question…How hard or how easy is it to be approved for a Heloc loan?
It depends. For those with good credit, easily verifiable income and a low debt to income ratio, it's extremely easy. For those with bad credit, hard-to-verify income and a high debt to income ratio, it's difficult.
Hi Peter, in which market/area are you able to purchase a 1m 12-plex? That feels like a good deal!
$83,000 per unit is still common in many markets across America
Thanks for sharing, Peter! Please can the same principle apply in Canada?
Yes
Thank you for this valuable information. I just signed up for your program and look forward to your mentorship. :)
Awesome, thank you!
Does warren buffett don’t work anymore? It’s nice to have more money n more holidays, but everyone has to work all their lives.. nice video .. appreciation.
Where can we find a building at 12 units?
All across America.
This is the video that made ocr tangible. Thank you so much
Anytime. Thanks for watching.
Hello when you take equity and go for commercial property .after put the equity money on the down payment do you have to take 2nd mortgage for pay the commercial property or just the down payment make you have the commercial property.
You will have three loans: a primary home loan, a HELOC loan, and an investment property loan. Your goal is to have your tenants pay all of the costs associated with the investment property.
What about renting part of your house ?
Wow nice advise but it to risky for me
Thank you Peter great advice
Very welcome
What is a good rule of thumb 4 opting either options as a 1st time home buyer, timewise ?
Are you asking for advice on buying a home as a first time home buyer? If so, we teach how to invest in commercial real estate. There are other experts out there that help you navigate through buying a home, such as th-cam.com/video/IomfI_iF4EM/w-d-xo.html
This video covered everything except the downside of every real estate investment. As the old saying goes, the grass is always greener on the other side of the fence.
Real estate grass is greener. It really is. Some statisticians argue that 90% of millionaires have their wealth in real estate.
Do you have a video on how to find off market investment properties? My equity scenario matches your example to a T but I’m in California so I would need to get an investment property outside of CA (too expensive here). Thank you.
The "how to" of finding off market properties is the Protégé Program. Apply here: propadvsr.com/applyhere
Thank you! Great and clear info to undrerstand about HELOC!
Thanks for watching!
Are you talking about the USA market only.??? What about Canada.?? Any ideas....???
I thought I would keep my current loan + I will have another loan ( the HELOC) to pay. The current interest rate on my loan is 3.175 %. I don't want to borrow 50K and get a new loan with a higher interest rate. My other question would be: what is better: a HELOC or a Home Equity Loan?
If you have a loan with a very low interest rate, you may want to keep the loan and just use a HELOC. But if your loan interest rate can be improved upon, then consider getting home equity loan.
@@CommercialPropertyAdvisors Thank you so much. I appreciate the time you took to answer. I wish you health and happiness, success you already have it❤️❤️
My current mortgage rate is only 1.99 and I have tons of equity. What is the HELOC interest rate? I'm considering using some funds to make my home more energy-efficient for long-term savings. Would love to hear some feedback thank you
I live in Canada does this work here
Woo this is a magnificent explanation of how use your HELOC to make more money. Thanks well appreciated.
What if you dont have enough equity for the project you have in mind? Any strategies for that?
Of course! Check out this video: th-cam.com/video/TuL7sjVHi0o/w-d-xo.html
@@CommercialPropertyAdvisors thanks 🙏🏼
How does credit play into all of this hood or bad credit??
Good information; however, some states only go up to 60% HELOC on commercial property. This means the loan would only be for $120K.
HELOC loan limits are not state dependant; they are bank and borrower dependent.
Why is "Today" the second best time to buy commercial property? Thx
He means Don’t wait no more if you wait longer prices will be higher on properties Ok. Sample I bought a house (fixer upper) $106,000. Back in 1996 in Oxnard California, now it’s worth $889,000. I refinance one time 1999 will pay it off in less than 5 years. Picture owning two properties or more, you are a millionaire. Take care and start investing, good luck. Happy holidays.
The BEST time to invest in real estate is always 5 years ago. Always. Just think back to buying a property in 2019.
Ahhhh.... I should have got that! Lol
Do you ever do Master Lease Options?
Absolutely. Learn more here: th-cam.com/video/yLgtOk48vkQ/w-d-xo.html
We had an inheritance about 3 years ago. It was enough to buy a house cash in Hawaii. House was 100 years old but had loads of potential. Weve resided here for over 2 years and are looking to get cash out to either build a rental at rear of property or find another home in the neighborhood to live in and fix up, what would you reccomend?
Add an ADU on your existing property.
Fabulous video, thank you sir.
Actually, lenders will typically only give you a HELOC for 75-80% of the appraised value of the property. So if you have a loan for 300k on a home worth 700k, then you can only get 225k out typically so the total does not exceed 75-80% LTV. You do not get to have 75% of the equity, you get 75% of the value.
And some Credit Unions will actually allow up to 95% LTV (although that is not recommended because keeping some equity is helpful in case of emergency and having to sell your house quick)
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
Most credit unions give a high LTV, some as high as 95% for HELOC’s
Thanks for sharing. Credit Unions can be so helpful.
What are your thoughts on a reverse mortgage?
Don't do them. Use that equity to acquire real estate, hire good management, and get ALL the benefits; cashflow, tax deductions and equity build up; rather than turning your equity into just a small amount of income.
Hi peter what about parking structure?
The way a HELOC works is as follows: Home price $700K
75% of $700K is $525K
Therefore $525K (75% of the FMV) minus $300K owed = $225K available on the HELOC
Bingo. Thanks for the comment.
Do banks need verifiable income before they allow us take out this loan amount? Currently if my duplex sits there that needs money to repair due to bad tenants finally evicted out with massive remodel works that cost money but vacant units have no rental income so can I still able to get HELOC even it has more than $500k equity sits there (SF, CA duplex usually FMV over $1.1M *75% - existing loan $300k=$525k equity but it has strong eviction/rent control laws against LL... now finally evicted them out! Hate evil CA rental laws, pls advise b/c I need the equality to massive remodel it then rent it out for max ROI after evicted a bad tenant only pays cheap rents due to rent control laws during those yrs! Thank you!
@@Ngan-zy9kd I know for sure that when applying for a First Lien HELOC, they qualify you just like a regular mortgage will. I'm not sure about Second Position HELOCs
@@weinvestcambiandomentalida2629 In short, your Answer means THE Y WILL QUALIFY U BASED ON INCOME (verifiable income), right? I'm looking for any loan/HELOC without income verify (no doc, mostly based on the value of the R.E has $1M equity and only wanna borrow HELOC like around $300k.FMV of the home should exceed $1.3m, - $300k 1s mortgage loan=equality is $1M, and only want to tap into 1st HELOC borrow out $300k or $200k for rehab, but property is vacant no income and awaits for rehab. Thanks!
hold on....regardless of your home equity amount, you still need enough income to repay the heloc. I may be mistaken but $85K annual income is not enough to pay back $950K in uequity
Why don't you rent out rooms to any first responder or college students short term rental...that will lower your cost drastically
Sometimes u have to get uncomfortable to get comfortable....that part...😊❤
@@reneemaricheau4150 that would put me in a better cash position BUT I would have to pay tax on the added income and it would not necessarily count as an income source when qualifying for the HELOC
@@reneemaricheau4150 True that!
When you write refinance, doesn’t your mortgage go up?
Wow so good ty.
Is 13.2% rental yield common in the US? ie 13200 rental income for a 1 mil apartment building! I would imagine a more realistic 7%-8% in which case the end result would not be pretty
Wow that is a master power move ! Basically got a $1million property without using any of your own money !
Helpful thank you!
Excellent presentation!! I will be reaching out to Peter
Great! Thanks for watching.
I think this is easy to follow , I would like some education, and guidance if we can work out something . When will peter get back to us?
The first step is take Peter's free video course: videocourse.commercialpropertyadvisors.com/p/commercial-real-estate-investing-for-beginners/
When you do a HELOC does your original home loan interest rate change?
No. The HELOC is a separate loan
Hello Peter! Thank you for the very informative video. Is this applicable for Canada?
Yes, BUT ... it's much more difficult to generate off-market deals in Canada. You have to develop relationships with Brokers to get pocket listings.
@@CommercialPropertyAdvisors thank you so much for the reply and advice❤️
So I have a house with mortgage of 750k and 400k in equity, I take a loan or line o credit for 300k to buy a second house, now in the short term I have to pay the mortgage for 750K, line of credit for 300K and the second property would pay itself hopping it gets rented 100% until it increases its value, probably 5 to 10 years later, while I am paying two mortgages (maybe three)
That's some nice handwriting
How can i use depreciate for the paid off priperty when i use it for rental property without taking out helok?
You can't take depreciation deductions on your primary residence; only on rental properties. If you acquire another rental property (thanks to your HELOC on your free and clear primary residence), then you can accelerate some of the depreciation using a cost seg, as explained here: www.commercialpropertyadvisors.com/cost-segregation-made-simple/
So let me ask you this, how do you refinance or get the equity out of your home by HELOC if you don’t have good credit 🤔
That's a tough situation because banks require good credit to approve you for a HELOC.
One important thing not mentioned here is getting an approval for the mortgage on the new investment property. A bank is not going to just give you a $700,000 mortgage as stated in your example when you already have a mortgage of $300,000 on your primary and a $300,000 HELOC on top of it unless you can income qualify. Twenty years ago you could’ve done this with a handshake and stated income but not today.
Thank you for a very clear operation of RE
You are very welcome. Thank you for watching.
Very good advice thanks
Fantastic explanation! Thank you very much
You're very welcome!
Thanks from Ozz 🇦🇺🙏💖
Very educative and simple to understand
Thank you for watching!
The key is finding the “deal”. When I crunch the numbers in today’s market, there is no room for positive cash flow unless you have a large down payment. Pulling money out of your prior real estate investment sounds good but again that all depends on the purchase price of your new investment and the available cash to put down. It’s not impossible but you have to find someone that is desperate to get out of their current real estate. Perhaps they bought high and can not maintain the expense of the property. Idk, I’m still looking..
What an amazing video. Thank you!
Awesome information Peter. Thank you 🙏🏽
I appreciate the compliment.
I want to use the equity in my home to travel. I have no mortgage. I am 81 years old and I want to travel on cruise ships one trip per year, for about $20K. I want the longest re-payment period and lowest interest rate. I would prefer repayments after I pass on, from sale of property. My home value is far below 'reverse mortgage' requirements or so they tell me.
My house has been paid off for 3 years. Im thinking about selling it.
We paid off our house a few years ago, and now that we’re nearing retirement, it feels like a missed opportunity to let all that equity just sit there.
I’ve been looking into it too. It seems like you can turn that equity into something that works for you, but the question is how.
@@Kattyol1 That question is answered in this video! Your equity is a huge opportunity.
Yea, I wouldn't regret it if I were you. Beware the devil is in the details. I was a realtor I can't tell you how many 'investors' came to me to buy income property. They think the sales prices of real estate is ripe with rental income and the seller doesn't know what he has.. Don't buy it! pun intended. The payoff is long term. The seller marks up the price making it a long time before you make profits. In the mean time you deal with renters failing to pay, evictions and people causing property damage that you will never recoup and your loss of peace and sanity. The only winner is the bank collecting interest.
@@wheelie642 You, as the Buyer, have the power to find off-market deals and negotiation purchase prices that are low enough such that you, as the Buyer, are the winner from the very start. Sure, brokers may try to convince you to buy bad deals, but you have the authority not to "buy" into their persuasion. You make your money when you buy. And meanwhile, banks are not the winners, smart real estate investors are.