That’s right! There is a big pile of cash stashed away, stuck if you will, inside your home. Patiently waiting for you the savvy investor to finally wake up, free the cash, put your heels 👠 on and use it to start making deals!
What’s The Big Problem?
The most common problem for you as an aspiring real estate investor is usually the money! I don’t have any dough, I can’t finance it, I can’t get a loan, I don’t know anybody with capital, I’ve nothing saved. Right? Always looking in on all those lucky investors working the fields, playing the game, flashing the wealth, the good life, the freedom. Sitting on the sidelines waiting for your ship to sail in. What if you knew that all of this time you have been “unknowingly” sitting on your personal money tree that you could have and can “use” for investment purposes 😮, because of the ease to start. Easy money to propel you into your first investment portfolio. We know! We also hear euphoric angelic bells of hallelujaaaaaaa 🎶
The Solution Is Right Here!
Most starting investors have one gateway to launch them into business: their primary residence. If you own your house, we got 3 easy ways to kick off your investment journey. If you don’t own your house don’t panic we have you covered. Just swap to “How to jumpstart your own cash machine”. Where we give you many insights to your own financing kit and endless possibilities. So what are you waiting for? Go jumpstart your own Cash Machine!
The 3 Easy Ways Out!
Next we summarize 3 ways you can easily, instantly cash out on your primary residence. But the most important aspect of creating money out of thin air using your primary home as a collateral is that this is TAX FREE money! Another great side effect is that there is no limit to how often you can keep repeating this 😍.
That’s what we call: Infinite Financial Freedom.
Okay without further ado:
1. Cash Out Equity With A New Mortgage. TAX-FREE.
2. Get A HELOC: Low Interest, Working Capital At Your Disposal. TAX-FREE.
3. Pull A 121 Exclusion With Our Without Keeping Your Property! TAX-FREE.
Cash Out Equity – Complete Refinance With A New Mortgage
If you own your primary residence for a while and have been paying down on the loan, you probably have some unused equity lying dormant in your house. Even if you have only been paying interest on your mortgage chances are that due to market appreciation over time, there is some equity build-up.
Okay if you don’t have enough payment time on your side you can use the method of forced appreciation! Experienced investors called this the “Lipstick Fix” when they use small cosmetic adjustments to push the appraisal up by adding perceived value. You might even do, a partial “BRRRR”, some more drastic changes such as an extra room (garage/ rooftop/ basement), bathroom or kitchen update that will massively increase the value of your home gaining back all the investments made and then some. In this case, you don’t rent out but simply cash out on your property. 😉
Anyway, you just have to get your house an updated appraisal and refinance your mortgage to the new base and voila! Tax-Free Money in your pocket. Don’t go spend it, Invest It!
Get A HELOC!
A HELOC is a Home Equity Line of Credit. Banks and lending institutions allow you to use the equity of your primary home up to 90% of the value of your home for a loan. In its simplest form, a HELOC works somewhat like a credit card. Money can be borrowed up to a certain credit limit set by the lender, and the homeowner then pays back the borrowed amounts along with interest. This option can offer more flexibility — you can even withdraw and make payments on a daily or weekly basis, if necessary.
HELOCs and home equity loans (as mentioned above) are similar in that they involve borrowing against your home equity and using the home itself as collateral. The differences between a HELOC and home equity loan might seem minor by comparison, but they can matter quite a bit when it comes time to borrow and pay. The length of a HELOC can vary, but they can run for as long as 30 years (often with about a 10-year draw period and a 20-year repayment period).
For instance, a home equity loan doesn’t allow for “revolving borrowing” (repeating) like a HELOC. Instead, the borrower gets all the money as a lump sum up front (one time borrow) and spends the life of the loan paying it back (plus interest) on a set repayment schedule. On the downside, the stability of that fixed rate usually means it’s higher than at the rate you may get for a HELOC.
A Complete Refinance also involves borrowing money against the value of your home, but it requires a full refinancing of your current mortgage rather than setting up a separate agreement as in a second mortgage or typical home equity loan.
So the difference is in what you want. To get a one-time big chunk of money out now at a secured fixed rate then take a Complete Refinance, if you rather want the flexibility to recurrently take money out at any given moment at a low rate then go for a HELOC.
Pull A 121 Exclusion With Our Without Keeping Your Property.
Section 121 allows an individual to sell her residence and receive a tax exemption on $250,000 of the gain as an individual and $500,000 as a married couple. To be eligible for this tax savings, the home must be held as a primary residence for an aggregate of 2 of the preceding 5 years. This means that you can keep the profits -250K up to 500K – in your pocket and buy into your next investment. It gives you at least an initial tax-free capital opportunity like the 1031 exchange to take that first leap you can even pull a 121 and still keep your home!
Dive deeper into the creative Tax Planning World and take a closer look at the benefits of a 121 Exclusion and the bigger wealth creation opportunities of the 1031 exchange.