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To me, credit = equity. If you run out of credit, you can't buy a cashbond. And by definition, if you've run out of credit how can you borrow more?and when you run out of credit, borrow more and purchase cashbonds to "create" income you really don't have so can again borrow even more
Low income. Yet every reference to bbg's income figures is to "taxable income".I have always been a "high equity low income" type investor and had no problems getting loans.
The argument is not about being limited by equity - in fact it is the equity that allows the cashbond!This is why I don't understand the argument of not being able to borrow with lots of equity. I'm sorry if I come on a little strong at times, but its a really weird concept to me.
Originally posted by Mikhaila
Hi BBG,
Could you please expand on your borrowing techniques. You know something I don’t know about how banks lend money. You said bank(s) lend you based on real estate valuations. As I know, this is true but they also want to see your ability to service a loan, and that has little to do with the equity you have. I noticed you provided more that 20% deposit in all your examples. Do you always put such deposits on the properties? If yes, that explains why you can borrow as pretty much all properties are cash positive or neutral straight from the beginning.
Regards,
M.
Originally posted by Steve Navra
The annuity rates quoted by various insurers changes on a weekly basis . . . The rate currently hovers around 4% depending on the term. As a rough guesstimate I use a 2.5% difference so:
$2,500 per $100,000 X number of years.
Now before Bill.L jumps all over me . . .
Yes this is an EXTRA cost, BUT I maintain that as long as the structure is used to acquire a half decent asset (PROPERTY) bought in the 'right'place at the 'right' time and definitely at the 'right' price . . . then the capital growth should be in excess of the cost.
NOTE The structure is flexible . . . so at times of high interest rates the term of the annuity can be varied to reduce the extra cost. (What you save in cost is offset by the length of time of the cashflow)
regards,
Steve
Originally posted by XBenX
If the growth of your property (assuming neutral cashflow) is less the the gap between your interest rate and the annuity rate, would the cashbond strategy be a good one?
Originally posted by XBenX
PS no need to be so defensive of your strategy
Originally posted by Kevmeister
(I was actually thinking in reverse along the lines of "high yield properties are often low CG", so could a cashbond be made to work in that circumstance).
Originally posted by Kevmeister
I see XBX's point, though. It's a good boundary condition to illustrate when it is not appropriate to use a cash-bond.
Steve, this raises another interesting question - would you ever recommend using a cashbond for a low-growth property is that property was cashflow positive?
(I was actually thinking in reverse along the lines of "high yield properties are often low CG", so could a cashbond be made to work in that circumstance).
Originally posted by brains
We only have to wait a couple of years and ALL PROPERTY will be low-growth . . .
Originally posted by Steve Navra
This you know for a fact . . . right??
Regards,
Steve