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at noradacapital.com today. Welcome

1:02

to Passive Real Estate Investing, the show

1:04

where busy people like you learn how

1:06

to build substantial passive income while creating

1:08

wealth for the long term. And

1:11

now, here's your host, Marco Santarelli.

1:14

Hello and welcome to another episode of

1:16

Ask Marco on the Passive Real Estate

1:18

Investing show. I'm your host,

1:20

Marco Santarelli. Thank you for joining me here

1:22

today. Another great question, someone

1:24

wrote in and asked me about

1:27

investing using cash versus using a

1:29

HELOC, which is a home equity

1:31

line of credit or just simply

1:33

a line of credit against your

1:35

home or property. And

1:37

the question came in from, well, it's

1:40

actually two people by the looks of

1:42

it, Jay and Julie working together here.

1:44

I'll just read their email real quick

1:46

and then address it. So

1:48

they write and say, hi, Marco, I

1:50

love your podcast and actually bought my

1:52

first property with Norada. Well, thank you.

1:54

Thank you for all of your information. Informative

1:57

episodes. I can't get enough. We

2:00

walk my dear mom who was a very

2:02

smart and savvy investor and my condolences go

2:04

to. I. Will soon

2:06

be receiving a large inheritance of six hundred

2:08

and fifty thousand dollars. Additionally, my two siblings

2:10

and I will be inheriting a Bay Area

2:13

home that is fully paid for worth at

2:15

least a million dollars. I've.

2:17

Considered buying out my siblings

2:19

for the home with the

2:21

inheritance money. Which. Would leave me

2:24

with a debt free home to live in and

2:26

at least one million dollars and equity. If so

2:28

I would plan to take the he lock the

2:30

home in agree line of credit. And

2:32

invest that equity into rental properties in

2:34

better markets. Alternatively, we could sell the

2:36

house which would leave me with at

2:39

least one million dollars cash between the

2:41

inheritance and home feel. I could then

2:43

rent or buy elsewhere and use that

2:45

one million dollars to invest and rental

2:47

property and better markets. I. Am

2:49

tempted to buy my siblings out so I

2:51

can have the Bay Area home for live

2:53

in or rent out since acquiring a home

2:55

in the barriers so expensive and competitive would

2:57

you suggest this? Is it feasible to take

3:00

a he locked and invest that one million

3:02

of equity or is it was her to

3:04

sell the house and in death the cash.

3:06

I also have to consider where I would

3:09

live if I did sell the house, whether

3:11

to rent by our house hack. Ideally I

3:13

would stay near the Bay Area since my

3:15

work is here. I know this is a

3:18

long question and I think you in advance

3:20

for your time and expertise will thank you

3:22

for the question and it's a great problem

3:24

to have if you will. Anything I say

3:27

here of course is not financial advice. I

3:29

did response you as you know with some

3:31

clarifying questions Basically a wanted to know if

3:33

you were living in that same house or

3:36

living elsewhere and. You know, I assume

3:38

that you had a place in the

3:40

area, so turns out that you just

3:42

moved into that home from elsewhere. probably

3:44

renting elsewhere, but now you're living there.

3:46

But of course you can move back

3:48

out, rent someplace. The idea I had

3:50

for you originally and I still think

3:52

is probably the best option. Is.

3:55

You know my comment use he knows if

3:57

you're living. Elsewhere or Canada where

4:00

and you're happy where you live. Now

4:02

you may want to consider buying out

4:04

your two siblings which your cash the

4:07

cash inheritance and then selling the property

4:09

after you've completed transaction the a full

4:11

ownership and you're on titled the the

4:14

property complete sale using a ten thirty

4:16

one exchange which is a tax deferred

4:18

exchange. It's a says it's only the

4:21

property taking all your equity. You.

4:23

Don't touch it, but you don't

4:25

get taxed on it and enrolling

4:27

that equity into multiple properties in

4:29

other markets. Are basically

4:32

a portfolio of properties elsewhere and

4:34

this will allow you to invest

4:36

one hundred percent of the net

4:38

equity from their property tax free

4:40

to maximize your investment dollars and

4:42

and help you build the largest

4:44

portfolio you can. Without.

4:46

Having to pay taxes as part

4:48

of that original sale so this

4:51

is one option. Multiple options available

4:53

to you. But. From what

4:55

I know and what I think I

4:57

know based on your situation, this is

4:59

probably the best scenario. Now we're making

5:01

some assumptions here. of course that feel

5:04

more expensive markets like San Francisco Alley,

5:06

New York are going to flatten out

5:08

there. There may be some pullback. we've

5:11

already seen this happening in different areas.

5:13

Around these larger metropolitan areas is more

5:15

expensive markets so you can always count

5:17

on or bank on appreciation each and

5:20

every year, especially like we seen in

5:22

the last four years or so. Or

5:24

from or more where you seen very

5:26

strong in many cases double digit preseason

5:29

rates that's not sustainable on your business

5:31

gets to a certain size and the

5:33

cracks start to emerge. Things you used

5:36

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I checklists Nets We dot

6:50

com/real estate term. We're.

6:53

Due for a breather and we're due

6:56

for a pullback in some or many

6:58

market. So a lot of the markets

7:00

used to be strong and very strong

7:02

in terms of growth and price growth.

7:05

Now we're seeing a lot of war.

7:07

normal market conditions in a normalized market.

7:09

In probably close to seventy percent of

7:11

the markets that we track they've they've

7:13

normalized, and now they're somewhat neutral. They're

7:15

not strong, they're not week, they're just

7:17

kind of coasting along, and that is

7:20

expected to discover that market breather after

7:22

a strong run up in terms of

7:24

price appreciation. So

7:26

that is what I see you know in

7:28

your response you had emailed me back you

7:30

it said ah thank you so much for

7:33

email I know you're really busy and truly

7:35

appreciate. Your time and responding and in making

7:37

your podcast. So you answer my question that

7:39

you are currently living in your mom's home

7:41

rent free. He moved out of your apartment

7:43

and into this home a few weeks ago.

7:45

Decorate. It just means that you can move

7:47

at any were you. I'd find the place

7:49

that makes sense. That price that you want

7:51

you had made a comment: I'll just read

7:53

your email. you're doing a tethered one exchange

7:55

into a portfolio of other properties is very

7:57

interesting and I hadn't thought of that. I

7:59

didn't. Why they could do a ten thirty

8:01

one exchange into multiple properties? I thought it was

8:03

a one for one exchange. Thank you for that.

8:05

So yes you can do at Ten Thirty. Wanted

8:08

to multiple properties. You. Just have to

8:10

work with someone who can hold your

8:12

hand and coordinating that with you. Because

8:14

when you get into a ten thirty

8:16

one, there are your time limits that

8:18

you have to stick to. You've got

8:20

Sir milestones you have to meet, and

8:22

the Iris is not forgiving without. So

8:24

for example, you have to close within

8:27

one hundred and eighty days. But you

8:29

have to identify your properties within a

8:31

relatively short period of time. So you've

8:33

got three milestones or forty five day

8:35

and ninety day and a hundred a

8:37

day hurdle to get through. So. Once

8:40

you start the sale, you wanna be working with

8:42

a Ten Thirty one. Commentator or

8:44

maybe even just do that first. That

8:46

way you are ready with the team

8:48

around you and that may be one

8:51

of our investment calculus here that are

8:53

lining up properties ready for you to

8:55

put under contract once your property is

8:57

sold. Whether you sell yourself with you

9:00

have it listed so you have to

9:02

be very conscious of the time and

9:04

the timing. Of the sale because

9:06

once that property is is under contract

9:08

you gotta be mindful and ready to

9:11

put some properties under contract. Once the

9:13

sale happens on the clock has really

9:15

started going back your email here after

9:17

realising to some of your episodes I

9:19

think it's. Probably. Best that

9:21

I rent instead of purchase in the Bay

9:23

Area if we sell the home. Than.

9:26

He said my last question is if I

9:28

decide to keep the home which is already

9:30

paid off is a plausible and why do

9:32

he lock and invest the equity elsewhere. And.

9:34

You conclude that email busing for you so much

9:36

Marco, you're really changing people's lives with the information

9:38

you are putting out there. I really feel that

9:41

I can build wealth and be financially three With

9:43

this inheritance is live. I invest it wisely as

9:45

very true. And. That is because

9:47

I feel empowered with everything I've learned from

9:49

your podcast and some great a dusting bucks.

9:51

regards J and chewing while you very very

9:54

welcome. So yes to your last question you

9:56

know he locked vs you know, investing the

9:58

equity elsewhere. Well if you're using a he

10:00

lock me of rates today on a home

10:02

equity line of credit are going to be

10:04

pretty expensive. the other a the have to

10:06

about ten and a half percent depending on.

10:09

Where you go at lending institution you

10:11

go with so if not she money

10:13

and often those he locks are available

10:15

to you for a ten year term

10:17

so at that point you'd be to

10:19

repay it and for or redo your

10:21

he locked or find a he like

10:23

elsewhere or whatever the case may be

10:25

so keep in mind that it is

10:27

six term but of course you can

10:29

always work something out with banker lender

10:31

converted into alone whatever them cases but.

10:34

Whether. He like you have a monthly

10:36

debt service payment that that will have

10:38

to be paid for ideally from the

10:41

properties that you by using that he

10:43

lock as the down payment. Or

10:45

towards the purchase. Generally

10:48

speaking, it makes far more sense

10:50

to just take the cash if

10:52

you will from the sale of

10:54

the property the he lock ideally

10:56

doing a through a ten thirty

10:58

one exchange so you're not taxed on

11:01

it and using that as your

11:03

down payment capital or purchase capital

11:05

towards one or more properties multiple properties

11:07

in other markets markets that will

11:09

provide better rates of return, better

11:11

cash flow and probably now say maybe

11:13

the probably better upside potential or

11:15

appreciation potential because of the growth

11:17

going. On in other markets. Well, some

11:20

markets like San Francisco and may be

11:22

L A and New York and other

11:24

major metro areas that had strong price

11:26

run off. while they may be off

11:28

flattening. Or. Maybe pulling back a

11:30

little bit. There are other markets that are

11:33

still experiencing very strong growth, and even if

11:35

that appreciation a single digit like nominal or

11:37

more like the historic norms of let's say

11:39

six or seven percent. Four. To seven

11:41

percent price appreciation for year over a long

11:44

term average. You'll do better in those markets

11:46

short and probably medium term than you will

11:48

in a market that is going to sit

11:50

flat for a few years or even pullback

11:53

where you're losing equity. So there might be

11:55

a you know, a decision point here have

11:57

to sell sooner than later if your decision.

12:00

This to sell the property, but again, the

12:02

going back to what I was saying before.

12:04

Not necessarily financial advice of course. You.

12:06

May be wise to take full ownership

12:08

of the property, use your inheritance to

12:10

pay off your two siblings so you

12:13

have full ownership and all the equity

12:15

in the property, and then do the

12:17

ten thirty one exchange with all the

12:19

equity. Haven't that property? And

12:21

use that as your investment capital to

12:24

build a portfolio of multiple properties in

12:26

one or two markets maybe with three

12:28

years markets depending on know what you're

12:31

investing in. So. I think

12:33

that would be a good good

12:35

conversations have with one of our

12:37

investment counsellors And so there's no

12:39

cost or obligation to to that

12:41

ever. So just feel free to

12:43

reach out to my team because

12:45

it's worth the conversation. But dumb

12:47

me personally. Again, not financial vice.

12:49

I would consider using the equity

12:51

and not using he locked to

12:53

so I can maximize and leverage

12:55

that equity. Without. Having. Another.

12:58

Loan of sorts, which is your.

13:01

He. Lock to serve as each and every

13:03

month with the properties. I think you make

13:05

out better if you run the math. If

13:07

you actually pencil the sound, you run the

13:09

mouth. I think you'll do better without the

13:12

He Lock and just reinvesting the equity and

13:14

other properties. And you can pencil without. You

13:16

have to make a few assumptions but you

13:18

can create the scenarios of investing in a

13:20

small portfolio offer to three homes and they

13:22

view Memphis or Indianapolis Her Kansas City. Just

13:24

look at the market. With that we have

13:27

we have inventory and and a pipeline of

13:29

properties videos on your own to. Same

13:31

thing to slicker. The properties run

13:33

the numbers and just see how

13:35

you'll make out with having just

13:37

a single loan on those properties,

13:39

a first mortgage versus having financing

13:41

and a he locked service back

13:43

in California here. so. I.

13:46

Hope that helps. Great question. I think this

13:48

comes up for lot of people making a

13:50

decision as to whether to use liquid cash

13:52

or a line of credit of some kind.

13:54

Whether a home equity line of credit or

13:56

just the line of credit. And.

13:59

Against the system. The have to run the

14:01

numbers and see what makes the most as

14:03

so. Again I appreciate the question. Thank you

14:05

so much for everybody listing. appreciate you taking

14:07

the time. If you haven't subscribed to the

14:09

show remember to do so Tix all of

14:11

your three seconds of your time the of

14:13

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14:15

summit them to me and have to answer

14:17

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14:19

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14:21

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14:23

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14:26

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14:28

Norad are real estate.com Download our free guide.

14:30

The ultimate guide to pass a bill in investing

14:32

available on our website and that is it for

14:34

today. Thank you for listening. I will see you

14:36

all on the next episode! Are

14:39

you looking for a road map to financial

14:41

freedom? We have a

14:43

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14:45

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14:47

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14:58

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