Ok, everyone, I'm gonna let you in on an amazing secret I recently discovered. It's more or less a loop hole in the way banks lend money. I know it sounds like I'm giving out fairy dust here, but I swear this makes sense. Here's how it works.
If you currently have a HELOC (home equity line of credit) then this will make a little more sense to you.
In order to do this you will need to have a heloc that you can use as an MMA (money merge account).
Let's say you have a heloc for $10,000 (many of you may have them for far more, but the amount doesn't matter, so read on). You then use $4000 of it to put a new roof on a rehab property you just bought. At the end of the month, you'll get a bill that says you owe, roughly $50 as your first payment (which is more or less interest and a little piece of principal). If you deposit your next $2000 paycheck into your heloc (instead of just paying that little $50 payment) the bank will calculate what you owe them as $4000 - $2000. Making your new balance $2000, and they will consider that your payment for the month, (meaning they see your payment as having covered that $50). The thing is, you can then pay all of your regular bills OUT OF that heloc with the debit card and checks that they give you when you open it.
So, you pay your $2000 worth of household bills out of the heloc and end up with a new balance, at the end of the month, of $4000. Now, you're in a new month, with the same balance that you had last month, and you haven't actually paid ANYTHING toward that account, but it's kosher because you "appeared" to make your payment for the month. And, in reality, you did. You just took that payment right back OUT after you made it. If you do this for 10 months, or 20, you will still have a balance of $4000 and will continue to be able to put your chunk of money in and then use that chunk as you normally would. Your balance will never change unless you charge more to that account. This is the beauty of "open end" loans, as opposed to "closed end" loans (like a mortgage, which this would not work with). So, take out a heloc and start using the money in your investments. Sure you have to pay it back eventually, but you're not paying interest on it and you're likely MAKING interest on the thing you spent it on. It's the best and only way to get free money from the bank.
I hope this made sense to you all. Tell me what you think. Grade the blog. Be my friend. :)
Abe
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