Here is a question that a lot of our readers can relate to coming from one of our School of Wealth Strategy students:
Q: Hi Tom Regarding the Velocity principle - What would you suggest regarding pulling equity out of the real estate investment. An equity line or a refinanace? it appears that Eq line terms are shorter duration now, and you still need to pay back principle so it would seem to me a refinanace would be in order. Best Regards!
A: First of all, congratulations of having equity in your real estate. Not too many people can say that right now. Second, I would suggest sitting down with your Wealth Coach to examine the terms that you are getting from your Bank on both the fixed-term and variable term loans.
My preference generally is more flexibility. This leans towards a HELOC. There are times that a fixed loan is preferable. If you have immediate use for all of the funds, a fixed loan is great. It's better from a credit score standpoint and you can structure it so you have a fixed rate of interest. In these times of low interest, this is particulaly advantageous.
The challenge comes if you don't have an immediate need for the money or if you want to use the money sporadically. Once you take out a fixed loan, you are paying interest on it continually until it is paid off. And once you pay down the principle, you can't go back and take it out.
If you do choose a fixed loan, be sure to build a complete wealth strategy before taking out the loan. Design your strategy so your loan is used productively all of the time. That means that when you aren't using the money for more real estate or more of your primary strategy, that you have an outlet for it, such as a hard money loan. Check with my friend, Wayne Palmer, who handles hard money loans professionally to see if he won't invest it for you on a temporary basis when you aren't using it.
If you don't have a Wealth Coach yet, contact our office at 866.467.5809 and set up an appointment with one of our Weatlh Advisors to determine what level of Strategic Wealth Coaching is most appropriate for your situation.
When you have a strong, complete, Wealth Strategy, your financial freedom will be closer than you think.
Warmest regards,
Tom