in this video we're going to talk about how do we use the debt acceleration
strategy aka the HELOC strategy to start expanding your wealth to build cash flow
income by buying more rental properties
hey what's going everyone this is Sam Kwak one of the Kwak brothers and in
this video we're gonna talk about how do we use the HELOC strategy to expand your
wealth to buy more rental properties in increasing your cash flow income now
chances are you may have seen my other video how to pay off your mortgage in
five to seven years and I ask you guys if you haven't seen that video just yet
check out that video first because this video won't make sense unless you have
the right context and the perspective from that from the other video so what
I'm gonna do is I'm gonna go and leave the other video that I just mentioned in
the video video description down below so that you guys can go and check it out
watch it and then come back to this video as part of the sequel I've been
getting a lot of criticisms a lot of feedback from skepta skeptics you know a
lot of skeptical people are saying well how does this strategy even work if the
HELOC interest rate is higher than the mortgage and a few other things and you
know I'm not gonna make this video about you know defending myself but I ask you
guys for those who are skeptical and you guys are just you know you guys don't
believe that this strategy works I would ask you for a possibility open your mind
and really dig deep into the numbers and the mathematical reasoning behind this
strategy because I was a skeptic first right I was like man this this strategy
cannot work math just doesn't check out right but if you go deeper and really
get the the underlying reason as to why thousands of people are using this
strategy to save interest and paying up their their mortgages quicker your you
also will be a believer right so definitely check out the math and before
you try to disprove anything or try to criticize anything my argument to that
is you can't criticize what you don't understand right if you don't understand
a strategy then you really don't have a place to criticize it because you don't
understand it right if you if you fully understand it like I can criticize a
strategy from different angle like for example it will mess with your credit
it's gonna mess with other a few things but if you really don't understand the
strategy fully there's really no ways to argue against it or criticize against it
enough of defending the strategy we'll get to the content of this video so this
video is going to be all about offense right the
other video how to pay up pay off your mortgage in five to seven years it's
more of a defense this is more of an offense like how do we actually go out
there and buy more properties replace our income with cash flow and passive
income so assuming that you guys are a good fan you guys love this strategy and
thanks for sticking around we're gonna go and give you guys a scenario as to
how the next part the offense part will work so let's say we have a HELOC here
which by now you guys know that this stands for home equity line of credit
and we know that this is attached to your property there we go and let's say
you've completely paid it off I know some of you guys are working on it still
working on paying down your mortgages in the strategy so you guys may have
considerable amount of equity but let's say you have a we have a flat paid off
equity of $200,000 okay that's what we're working off of here so what we're
basically doing and you may already know this but now we're taking the equity of
the of the property that you have and we're gonna start to divide and conquer
and find rental properties so we're gonna call this rental property one
rental property - and I'm gonna put the math behind this soon here and pop me
number three so I know not all of you guys gonna go out and buy like 3040
properties so I'm just gonna stick with three properties just just to be
conservative with the numbers so let's say with with each of these properties
they cost a thousand dollars apiece okay I'm sorry hundred thousand dollars
apiece man if it was thousand-dollar the piece right 100 thousand dollars a piece
my bad okay so if we're going the traditional route of doing 20% down
we're gonna go and put 20% down on each of these now I know this is very generic
numbers not all property is gonna be $100,000 evenly but I'm just you to
demonstrate the possibility okay so 20% down $100,000 property each for the
rental properties and let's say each of them bring in about two hundred dollars
of cash flow yeah we're staying super-duper conservative
knowing that this is more of an average average number I want us to really focus
on the the general idea of how the strategy works okay so I'm gonna oh this
doesn't work anymore somebody used purple now I want to highlight this tap
the cash flow that's that's what it that's what the end of day matters so
now by now you guys are asking questions so what are we are we getting the loan
for the 8% like are we doing mortgages here what are we doing so if you want to
go really aggressive you want to get really aggressive and your credits great
your debt to income ratio is really great then maybe yes again I'm not
offering any financial or investment advice here I'm not a fighting to a
fight advisor but if you're if you want to get get this on a full gressive full
throttle ahead you may you may just wells use bank financing on all three
rental properties right you just might for me that's a little too aggressive I
don't like to get too aggressive because when you get too aggressive you're
leaving room for for mistakes and the potential downside right we don't want
to be we don't want to have a repeat of 2008 market crash or you don't ever want
to have your property go upside down right where we have negative equity we
don't want that type of situation and we don't want to be at the mercy of the
bank so what I like to what I like prefer putting as far as financing of
these properties is using owner financing now some of you guys may get
this cuz you guys been following us for some time and you guys know that I have
plenty of YouTube YouTube videos on how to do owner financing and all that but
for those who are brand new to the idea of real estate investing owner financing
is it's kind of like I'm having the seller when you're dealing with the
seller of the property the seller is going to be acting as the bank so when
you negotiate to buy the property you can make an arrangement a payment
arrangement of monthly periodic payments to the seller to the owner in exchange
for the ownership right of the property so a lot of times different states
haven't have this call this differently here in Illinois we like to call it
contract for deed I know in Texas you guys like to call it land contract so
how will you do it according to yours laws and local laws it will play out
with really the similar results so let's say we do it my way
right negotiating all three properties and to becoming owner financing there's
obviously lots of benefits the owner financing knowing that it won't report
to a credit generally speaking and a lot of times can close within one or two
weeks if you negotiated quickly enough with
bank financing you may have to wait two to three months to even close because
you know they have to come over the docket in the documents the banks have
to underwrite right they have to go through the credit check your your tax
returns so it can be a lot of cumbersome progress when you're dealing with the
bank so this is another reason why I don't like dealing with the banks when
it comes to financing properties so learn didn't go shoe with owner
financing check out some of my other videos on how to negotiate for owner
financing give you a clearer picture as to what we do to negotiate so now what
we're doing is we got the two hundred dollars a month in cash flow coming in
we're we've added a principal balance of sixty thousand dollars
we got twenty thousand dollars here twenty thousand dollars here and twenty
thousand dollars here right so now we got sixty thousand dollars of balance
okay with the HELOC okay and we got one
hundred forty thousand dollars to go if we want to spend more money now remember
from the others from the previous video right pane down your mortgage your HELOC
you're treating it like a checking account so these two hundred dollars a
month cash flow you're going it's not going it's not gonna go to your checking
account it's gonna get deposited right back into your knee lock does that make
sense so reducing the principal balance to the HELOC while you're also reducing
the balance on the individual properties now you might be asking so now we have
two payments don't we right like we have mortgage actually three separate
payments cuz we got three individual owner financing going on here we got the
payment for the hila but now you guys understand if you've watched the
previous video the quote-unquote payment for the HELOC is our income that we're
bringing it back in so you may have other source of income and then you're
spending the you reasoning he'll have to spend on other things
right bills groceries cetera right so car payment whatever so you're your
source of income whether it's a job or other business revenue you you're
depositing it's in Gila treating the HELOC like a checking account paying
your bills paying your groceries and etc and the monthly payments for your own or
financing that you're doing you're also doing it out of the HELOC okay so I know
there's a lot of arrows arrows going in and out don't can get really confusing
so I apologize so with that sixty thousand dollar
balance or bringing it down with this source of income with all of your cash
flow and what I recommend is that don't try to go and spend now now that you've
added six hundred dollars of positive cash flow don't just go out there and
increase your expenses by six hundred dollars okay don't go out and buy five
star stakes I mean if you can afford it great but I would trying to be
conservative as possible don't go crazy right with with with the extra cash flow
you're making you know it's it's the whole idea of keeping up the Joneses
right just because your income level goes up doesn't mean you should also
increase your expenses if you can help it so now we're attacking the $60,000
balance with the $600 a month in cash flow also with your source of income and
any net cap net cash flow positive cash flow you're bringing it so I if this
doesn't make sense so you go back and watch the other video how to pay off
your mortgage in five to seven years it's gonna make more sense that way but
now if we zero this out right let's say we fully paid off now we take our one
okay and then we used a HELOC to pay it off thus transferring eighty thousand or
whatever is and whatever principle balance is left on our one transfer it
over to HELOC so it could be around eight thousand or seventy-five thousand
because we would have made some payments by now right
so transfer it the same idea take all the income that's coming in from the
rental properties and your other sources of income and then paying it off the
heel off using the HELOC to pay off whatever expenses that you may have got
it and then now we we knock off the balance on our one which should
increase right our cash flow let's say up to $600 a month okay we tripled our
cash flow so you have to know exactly what I'm getting going with this right
we we knock up the balance we pay off the balance again right whatever $80,000
is balance and then we work on our - okay pushed it whatever balance is on
our - over to the HELOC should be less and then paying it off this goes up to
again $600 a month I know it's out of the screen sorry guys I'm gonna push
this over there we go and then same thing our three push it over to the
HELOC balance pay it off now what's what's what's interesting is that we got
six hundred and six hundred dollars coming in right so now it's more of a
snowball effect it's it's accelerating we're paying it off we're paying off our
three faster than r2 r2 is being paid off faster than our warrant because
we're getting more income we're picking up more income as we go so the more you
do this okay you buy more properties right r4 r5 r6 you just keep buying more
properties all the way till you got this triple triple effect where your snowball
is getting bigger and bigger and bigger to where now you have plenty of income
with a bunch of feet of paid off properties that's bringing you passive
income whether you're getting ready for retirement
or you just simply want to quit your job and live off of passive income that's
being generated from the properties now I know for those detail-oriented people
there's expenses that that are tied to the properties right you have to fix
stuff and repair things I'm giving you guys more of a general idea right
general concept and impossibility of how this is gonna work so I know that you
guys for those are skeptical people yes all you guys will always say skeptical I
get it but this is more of a general idea right
because if you have so much property you know if you have 10 or 20 properties
that are all paid off right bring in 600 hours a month in cash flow okay you got
a lot of income coming in a lot of economy of scale where if one of the
properties go down you'll still be okay so guys I hope that give you some
some possibilities illustration as to how do we go offensive mode with this
HELOC that we have and really start to build wealth build income to start
freeing yourself from having to have that obligation of a job whether it's
w-2 or being in a business so if you guys have any questions but go and write
them down below if you guys are still skeptical or you guys have
misunderstanding of how this strategy will how it will all work I ask that you
guys go and leaving that below that ask questions down below in the comment
section I'll be more than happy to help sometimes we get a little busy because
it is holiday season so it may be hard for us to catch up to the questions but
we'll do our best to get you guys the best inaccurate answer possible all
right guys thanks for tuning in and watching into one of our videos I will
see you guys in the next video take care well hello there you made it to the end
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