School me on investing...

Yes, but only 4.15%, not the standard 5.3% sales tax rate, so you get a little break. Yes, you pay it even if you lease. You pay it even if your car is registered in Florida because you live there 7 months out of the year and 5 in VA. If you park it here for 30 days or more, you are supposed to pay the tax. If you keep an out of state registered vehicle in a garage or at least well off the street in a longer driveway, you can most likely get away with not paying it, but if park it on the street the cop car cameras will catch you.

 

In CT, vehicles under $50k pay sales tax of 6.35% ... $50k and over sales tax is 7.75%. Then there is town's annual property tax.
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Ok. that crosses VA off the list.

 

Bingo

HELOC is for if your kid has cancer and you gotta fly him to Thailand for expensive stem cell treatments that healthcare wont cover.

There is ZERO logic in getting yourself back into debt that is well upon its way to being squashed.

 

I've had 2 HELOCs since 2019 and they have worked out great for me, but I didn't owe anything on my property. The interest rate has gotten kind of high. Started at 4% and now it's 6.5%.

 

Please note the ppt rate varies greatly by city / county, with the major metro areas typically being higher. Maryland is an option, but they typically pay higher auto insurance rates than similar areas in Virginia.

 

Meh, I used a HELOC to come up with money to buy my business. I probably wouldn’t have been able to buy my business without pulling out equity.

 

Rob is clearly less risk averse than I. I would not put my home under debt to buy a business.

 

Understood!!! Fortunately for me, my wife was less risk adverse as well

Definitely not for everyone and it could have easily gone a different way. We bought in August 2005 and the recession started in 08. It was hard making those big payments for the business based on good sales numbers when everything tanked. My rental business dropped from $20-22k a month to below $5k. That’s a lot of profit that covered payroll or the loan payment, etc.

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Gotta love a guy that throws it on the line and it works out for him.

 

Leverage the equity as an investment versus having it sit.

 

Very manageable mortgage on the primary residence, and the rental income is more than double the mortgage on that property. Not concerned about paying those balances down - especially at the low interest rates.

I'm primarily trying to determine if the home equity could be utilized differently. I have no major debt and don't want the HELOC for those purposes; was looking at it more like a low interest loan that could be reinvested for financial gain. I'm too ignorant to know if that's viable, and if so, how to do it, and thus the question here.

My troglodyte brain was thinking along the lines of: take out a HELOC at my existing interest rate, pay cash for another property that I could use as a rental.

edit: I should be saying a Home Equity Loan - not a HELOC. Was also told that the loan would default to my existing mortgage's interest rate (which is why I shared those percentages), but gathering that that information is also inaccurate. Looking for some general advice from the BBS Brain Trust so I know what path to start looking into and researching further.

 

i gotta look up all the ins and outs of that in the next year or two here. i don't care about free supercharging, but would still like the ability to supercharge in general if i build up a Model S swapped something something. i dunno whether that just means having the Tesla port so it plugs in? or if it means port/controller/motor/dash/etc etc etc the whole system? i gotta figure out which components are necessary and which can be aftermarket to accomplish that. i'm sure its posted in 500 places, i just haven't looked yet.

 

Unfortunately, the home equity loan or HELOC are at current rates, it would be awesome if they were at our old interest rates, like someone told you.

In my experience the HELOC is adjustable with a margin % over some industry rate, 6 month t-bill, prime rate, or in the old days it was often LIBOR.

For example in my business I have something called flooring (car dealers have this too) and that finances my new inventory. I currently have a supposedly good rate of Prime + 1% and prime is currently 8.5%, which means I’m paying 9.5%. Prime was only 3.25 back in 2021, so that’s how the government slows down the economy, those high rates keep me from loading up with so much inventory.

 

The matching interest rate seemed plausible, but too good to be true.

So HELOC / Home Equity Loan aside, I am still curious if there's any way to leverage my equity without selling the properties. If not, I'm fine with that. I felt like I was missing out on a really obvious financial opportunity in light of the informaiton I received, but if I'm not, I can bo back to blissful financial ignorance.

 

Surely you can do that and run numbers. I’m impressed your rental is generating 2x more than your mortgage payment.

I have a friend that has been in rentals for at least 20 years in S Cal, so he obviously hit at a time when it was hard to completely mess up. He leveraged his way up to 350 apartment units, duplexes, etc.

He said he didn’t get hurt too badly when Covid happened and people could totally get out of paying rent- legally. He did decide to sell everything but 1 apartment building in the San Diego area that has over 100 apartment units and he bought two commercial buildings occupied by the same tennant.

 

Basically 2x even (and our mortgage payment includes property tax and insurance), and yet acting as a landlord still bugs the shit out of me. We've owned the rental for about 5 years, and I have had 3 horror story tenants. The current tenant is....fine... but the bar has been set low. I couldn't imagine owning multiple rentals - nevertheless 350!? - so I'm not sure how many more rentals might be in our future. But, when we look at other avenues to try to be less dependent on our primary incomes, it's hard to ignore.

 

The math on buying a rental with your equity is pretty easy. Your rate on the money will be around 7%. Taxes are about 2%. Insurance about 1%. So, you need to make 10% annually in rent to break even without ANY consideration for repairs, vacancy, marketing, etc. If you spend $300k for a house it would need to rent for $30k/year or $2500/month. Realistically, it needs to be quite a bit more than that in order to not have to inject funds. The better question is what is your COCR (cash on cash return). In this case it is infinite. Which has some advantages.

You also might have some consideration for appreciation. Markets seem high at the moment, so it’s hard to know what to think. In your case it’s a bit complicated because the equity you are drawing is already in real estate and presumably appreciating. So you wouldn’t necessarily have that benefit.

 

Guess no more Hess Christmas toys

 

I remember those. Used to have a tractor/trailer one.