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Mike Pulley of homebuydesign.com explains velocity banking a.k.a. forced equity a.k.a. a credit swap. Find out how you can use a home equity line of credit like a checking account.
Email questions to PODCAST@HermannLondon.com
Shannon St. Pierre-https://hermannlondon.com/realtor/shannon-st-pierre/
Mike Pulley of http://homebuydesign.com/
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We are working from home because of Covid but we wanted to continue to learn and get excited about real estate stuff so we’re very happy today to finally have our guest on Mike Pulley and Mike does a lot of things he’s a rehabber he’s a you’re a contractor right Mike you guys do all sorts of different stuff you’re an investor yeah and I love to if you want to give us a little bio but the main topic for today is all about velocity banking and I consider you to be my local velocity banking expert so thank you very much coming on because velocity banking is kind of confusing but also sort of simple in some ways right so yeah about yourself Mike and no great to be here so uh for those of you don’t know my name is Mike Pulley and actually Adam and I went to middle school together way back no good old Crestview middle school man really not high school not high school now and you’re still friends yeah we pretend to be at least no I grew up in real estate since that time I since the age of five we moved here to St. Louis back in the 80s back when interest rates were in the high team my family moved here and ended up my dad end up working with a few brokerages throughout the years and then in 1993 he branched out on his own and predominantly all he ever dealt with was investors and commercial and industrial real estate so I grew up a lot being around that and helping my dad with open houses helping him go out with investors seeing the houses be really nasty to turn into something absolutely beautiful so did some architecture in high school built a hockey rink from the ground up and Pacific you know my uncle’s for contractors I grew up around that and yeah and then just went on a mission from Church forty years came back and Mike who I love helping people and which Lindenwood for nonprofit administration and found out it was exactly that nonprofit after two years into the profession and my wife wanted to be a stay-at-home mom and just started to grandiere wasn’t gonna hack it and so we get our first fix and flip this was back when you know you had a pulse you can get a loan and back then the banks gave us like half a million dollars like here just sign here and a lot of that was based off a relationships that my dad had with the banks and so we did our first vixen flip and took me 90 days really it was a month’s worth of work but ninety days becuase I had a full time job and we made over forty one thousand dollars and change actually I got the checks it ran from me it’s forty one thousand four hundred and eight dollars and 61 cents and so from your first deal I do yes that’s really nice copy it’s a copy so yeah I got it I got it on my other computer monitor kind of as a reminder you know where he started from and yeah so did that and you know I went to my job and I said hey you know what thirty two grand a year I just made 41 grand peace out put in a month’s notice and two hours before I finished my last day I got fired so I think that was a large way of saying you’re done you’re not going back I thought you know I just think he slammed that door shut because you know that was back in 2006 is when we got that was our first deal that we did and so you know I really feel like you know two years later is when the market really got went downhill and I feel like had that not happened I would have gone back into the nonprofit world when things got tough and so I’m really grateful for that that little lesson and and whatnot so so that’s me in a nutshell now fast-forward my wife and I always completed 179 fix and flips we’ve got we bought a bunch of rentals last year we actually used to have 17 rentals sold them all up by 2015 started acquiring again last year my 13 year old daughter actually bought her first round last year too so you know now it’s becoming a family affair and my family loves working with me in the business my wife’s a REALTOR® and so we love having fun we love doing real estate it’s a it’s fun because it’s a hobby but it’s also a profession from like we’re never working we’ll have to talk about how you daughter the process of your daughter biting him rental yeah maybe tax loopholes happy boy well yeah so um but seriously because I have talked at mulana my daughter she’s nine now but she’s kind of gone with me to go look at all the investment properties she’s watched rehabs so I’ve told her I’m like you need to start now and you need tried to explain the whole Brundle thing and how you make income and then that’s the way you save to get the next one so she’s like wait and I was like you don’t have to necessarily use your own money and so she was just like hold on so but yeah I would be a penguin mom not a real estate person I know I know and I find it interesting tickers like you have always been like well how’s your daughter house can she do that I’m like yes can do it too you know I chatting with a REALTOR® the other day on Facebook and she’s like I want to learn how to invest in real estate investing in a couple years I’m like well why not now she’s like we don’t have the money in like and you thought my 13 year old bid you know well she just had 20 grand lying around to buy a house so no yeah I mean anybody can start it at any age in any position and I mean that’s the beautiful thing about real estate right and it it’s definitely commodities felt it it’s needed you know people need a place to live no and what we find in real estate is there’s so many different niches and ways that people do it and like concepts and so today’s today is all about velocity banking which is I don’t know if that’s like a recent buzzword or if this is something that’s been around a long time I guess you can kind of give us maybe some of the history of it and I know you have a kind of a presentation to share with us and if it’s okay you we’re gonna let you go ahead and go through that and then Shannon and I will just really interrupt you constantly throughout the presentation with our questions oh that sounds fair enough yeah that’s awesome so I want to get to what you said about the terminology with it with velocity banking you know Renatus has really run off with that name and an adopted that name as kind of their own most of the world might know it as forced equity or in the financial world you know Wall Street they would call it credit swaps so just shifting where your money flows your revenue and everything like that rather than depositing it into a bank but I do need to go through a couple disclosures disclaimers before we start and then we’ll get into the presentation and like you said we can you know pause throughout the time and I’ll be asking you guys questions as well and will kind of be doesn’t talk about things as we go along so right first things first so let me share this screen here so I’m gonna go ahead and go into our disclaimers so I am an independent contract marketer within Renatus so what that means is I actually Renatus is an educational platform that I utilize that have helped me grow my knowledge base in the last few years even though I grew up around Wilson that has really given us that leg up and so so I’m independent contracting marketer so these the things that I’m sharing are from there and the things that I’m going to be sharing our examples as well so I’m gonna ask that you you know I’ll do my best to give you all the information that you need to make an informed decision prior to you know especially implementing velocity banking because you can get in trouble using velocity banking if you don’t know how to do it properly and you do have to be disciplined so since I’m an independent contractor I cannot and find or act with authority for and then also I’m not a licensed attorney I’m not a licensed accountant a financial adviser or CPA even in a so any of the things that I’m going to share today they’re just example you know either from my own personal life or just a scenario that we’re going to be sharing yep so ditto for me and Adam and then there is intellectual property in here so you know you you you know you can I know we’re recording this right now but you know this is for the sole purposes of velocity banking and what we’re going to be talking about today to be used outside of this so got it good daddy so this is our hypothetical situation and actually I’m going to share it what’s cool is when we’re not us came out with this training and they use this hypothetical situation this legitimately was my life back in 2007 you know so we had already started investing in real estate by that point so between 2007 2011 so I owned my house in four years right we did not get impacted as investors until two and so the delay didn’t hit us for another two years so this is our mine in my wife’s second house we paid two hundred thousand for this out and out in Charlestown right next to Newtown and our interest rate was 6% and I just found a kind of ironic that we’re not just came out with this training it matched up with my life and it made it perfect for me we get for me to be able to share as an example so and what I mean by that is you know if we look at our lives can I just say real quick I guess we didn’t quite say this yet and you probably probably will but so velocity banking is basically a tactic that people can use to pay down debt like rapidly right and you’re going to show us how you did it to pay down debt on a house but my buddy was telling me that he’s using it to pay down debt like on his credit cards and his car loan and stuff like that and so it’s kind of this like super interesting tactic to basically pay off your any any type of loans quickly because is velocity banking it’s really just all geared towards the mortgage the whole goal purpose is to pay off the mortgage I never thought about it as far as other debts and because they I mean just because it’s risky I think I’ve looked at it as risky but I think that’s because I’m not I don’t know a lot about it well Mike is gonna show us all about it so started in everything right well and so just like Adam was saying and you know I don’t think a lot of people whenever we share velocity banking a lot of people think yes this is only for home mortgages know anything that’s amortized so that student loans car loans home loans you can utilize that even if you don’t own a house to be like oh I don’t mean velocity banking because I don’t own the house I’m like well do you own a car you have a payment on your car well yes or do you you know do you have student loans you know I sat with one of my friends a year ago in our living room and you know back when we could do that stuff people could come over to your house and hang out but we showed him how to implement velocity banking it took him 20 years to pay up thirty thousand dollars in student debt and I showed a boat we built on a model that night how in eighteen months he could just you know eliminate that other thirty thousand dollar loan that he had he just looked at me and started crying he’s like you just saved me twenty years of life and so it was really powerful for me so let’s jump in it – Merry Christmas yeah I’m sorry I told you we’re gonna have a lot of questions you I said earlier you can use this for any sort of amortized loan and are you gonna get into this later is there a difference in in the amortized loan and what you were calling like a simple interest loan yes and I’ll get into that yeah okay cool oh let’s go then so so we’re gonna use this is pretty much my scenario and I’ll just share with you this is and this is a majority of America and most of America right so most of America they do have you know they do have credit cards with you know high back balances on them they do have you know and say this the median home price is a little bit less than two hundred thousand but we’re just gonna say two hundred thousand dollar home in this case they typically have twelve thousand dollars on their car and you know I know Rachel little a lot less than six percent right now but for the math of the model that we’re building out here we’re just going to go with that same with the car loan and the interest on that and then we’re line of credit over here where we’ve got twenty one percent right so we got twenty one percent interest on that line of credit so so we have five thousand dollars of income coming in so that’s that’s my met take-home pay right so I got five thousand dollars coming in and I have twelve hundred dollars going to my mortgage payment I have six hundred go into my car I have six hundred going to my credit card I have twelve hundred go to my lifestyle so for food and clothes and kids and you know all that stuff and then we have fourteen hundred going into safety now we know that most of America is not saving that much right but what they are doing is again not a financial adviser or not a CPA but typically at the end of in April we’re now July when they submit their tax returns what do they get they get a refund you know if they have a w-2 job they get a refund well congratulations you gave the government an interest-free loan but wouldn’t the issue is that are they so kind to you when you haven’t seen them right so so you’re giving the government an interest-free loan or again not a financial adviser but for me I look at something in it if it’s not keeping up with the cost of living right so if people put money into a savings account Adam what’s the typical interest on a savings account Oh point zero zero zero zero zero zero zero zero one right something like that so I I say if it has a point in front of it it’s pointless if it has a point in front of it is incredibly pointless because you’re actually losing money keeping that in the back right if you have an old 401k or an IRA you’ve got money sitting over there it’s not doing you anything right because your employer’s not contributing it’s just kind of sitting stagnant it doesn’t really grow again it’s not a financial ledger not a CPA any of that but to me personally it makes sense if it’s not yielding me at least the cost of living in growth every year why do I have my money does that make sense yeah so so now let’s look at it well why do you have like a big chunk of your money there you you’d think you’d want to keep some cash in the bank but like something yeah it’s always good and we’ll get into that a little bit more as we go along but good Shane what what temperature there’s water free that it’s sea level Oh freezing points 32 degrees Fahrenheit okay so Fahrenheit what about Celsius zero degrees Celsius okay their degrees so we look at that so zero degrees versus 32 degrees it’s kind of like you look at the interest right people look at the amortize interest and they’re like oh today Rachel Adam water rates today do you know three postcodes 3.5 or four I don’t know three point five so three point five and then they look at a credit card paint their statement like my mine is like twenty two percent or something like that well they look at the three percent three and a half well that’s way lower than the than the you know twenty two percent but if we look at Celsius versus Fahrenheit yes zero is definitely less than 32 unless you calculated differently right so in this case amortization is like Celsius Fahrenheit is like simple interest right so 32 degrees Celsius is like 70 something degrees so that is you’re definitely not freezing anything at 70 something degrees so which so then we go into here right so same scenario like one degree is is warmer than 32 degrees Fahrenheit right so people get so I hate to say it I love all my friends that are mortgage bankers and brokers but the people are getting duped because they think the interest rates are so low and in reality we’re going to go into what what you actually in the pain in that period so so that’s so good so you got five thousand in five thousand out again hypothetical situation loans are amortized now what that means is first of all do you know what amortization means over the life of a loan that’s why I was kind of curious about the definition of that where like I know that you know if I buy a house today my first payment is like this much of it is interest in like this money of it is principal and I think that’s what you’re talking about right so so you’re talking about the mathematics but we’re talking about the term like the Latin root for amortized means interest that does not die oh and let’s think about mortgage I don’t think they like that let’s think about mortgage what what is the first part of mortgage Mort what other words have Morton them died ality Morticia so mortgages death pledge is what mortgage means it’s Latin group for mortgage no we have death death pledge death pledge death pledge so you’re glad you till your death that you’re going to pay interest that does not die because what’s the reality of somebody actually paying off a 30-year mortgage it’s not even not even two percent of America pays off their mortgages really I feel like my dad’s generation did hey Mike okay because they don’t stay in their houses for thirty years or if they do they refinance at some point oh yeah they refinance at the next race you drop to save yourself two hundred bucks Oh rates drop you can roll in rates job then they take out loans or he likes to pay for college education which then extends about like or you refinance pay for college education so when you had maybe 10 years left now you’re back to you know yeah so what we’re gonna cover today is how velocity banking will actually help you exponentially grow your net worth so you can’t again without it impacting you because most people they’re not but like Shannon like you said like my parents and my grandparents their generation they lived in it and they pay it off right that was just that’s just how they did it and they built their net worth off of that our generation now and any generation after they look at what can I have for they don’t look at what kind of equity am I going to gain because they just use it as possible yeah that’s totally fair yes so let’s look at this so lines are simple right so a mortgage is one way right it’s you pay it down and what do you have available well if you have student loans and you pay it down you don’t have credit available out of there nor do you want it because it’s like shackles for eternity right for your student loans your mortgage you have theoretical equity right but how easy is it for you to get that equity it’s not very easy at all you know you’ve got to go to the bank you got to do it you know you got to get an appraisal you got a good inspection you got to make sure your credits good you got to make sure you have a job you get you know there’s all these hoops they make a dumpster 20 to 45 days later they finally give you your money back and then you’ve reset the clock all over again same with car loans you pay down your car loan what do you have available well you don’t have any equity because it appreciates so fast and they’re not going to give you any more money than what the car is worth so versus the line of credit or lines their simple interest when you pay it down what do you have available no dad please you have no debt but you haven’t you have an available balance to use right right so so lines are simple and lines are expandable contractable a lot like my waist it’s been the last year so or right now it’s expanding perfect for everybody I believe right now I’m committed in not getting the 15 so what’s the COPE correlation 15 vs. 15 all right let’s go to the next thing so you guys have seen this right you guys have seen an amortization chart yes okay so here you have you know you have your your first payment is 950 goes towards interest 250 towards principal or sorry otherwise yeah 250 towards spring right then we fast-forward to 30 years you know payment 360 and it flips right you have 250 going towards interest and you have 950 going towards principal I don’t know about you but 250 is pretty nice date night right at them you could go to 800 on Chophouse and so like get the appetizers and dessert and leave a tip and then you don’t how are nowhere but Brassiere with my wife so that’s all there is to it there you go so so you can see here let’s look at this right the average American moves every 7 years how much equity have they gained in seven years if we look at this line here they really haven’t gained a lot of equity right but they’ve also paid a ton in interest let’s look at what that interest turns out to be and just say four years we’re going to use a four year example right so cut exactly my four years that I lived in my house so let’s change it to four years in four years forty-eight payments of twelve hundred dollars you’re gonna have twelve thousand dollars that goes towards principal and forty-five thousand that goes towards interest so if I’m making five thousand a month so if my net take-home is five thousand a month that’s sixty thousand a year that means three quarters of one of those years I’m working for the bank I’m working for the interest then that’d suck one of those three quarters of one of those four years yeah yep almost almost the entire year of those went to the bank mm-hmm so and only one quarter of that year went to me in equity so let’s look at this so loans we want to get rid of loans as fast as well as fast as possible because what happens when time to get time to get tough right now right time you say that are tough right now for people they cut back on everything else and for the responsible ones they’re like cash they’re going to make our mortgage payment I still got to do this note and that gobbles up everything and that takes away from their ability to actually live a life right so lines are revolving so when you use a lot when you use a loan it gobbles up 100% of your cash flow where principal is liquid inside the lines so we have two rules this kind of goes along with our real estate educational stuff so you know the employee mindset we have a whole section that talks about the employee mindset versus business mindset and the tax differences and so then we talk about the wealthy how they use cash to create velocity because you know Adam you and I talked about this the other day if you got cash and reserves that gives you the ability to move quickly right so we have cash gives us that velocity but when we have cash in the bank and we have good credit what are the big things we want to just throw more credit us right because they we can show to them that we know how to manage our stuff so that that’s our rule there so lines are better than those not lines over loans not lying not loans but lines are better than the most cuz you get one okay so lines are better than loans so lines of credits correct okay so lines of credit but then once you start using that line of credit it becomes a loan doesn’t it no cuz it’s just utilizing your you know your utilizing your line of credit as a loan Shannon but he’s saying it still stays as a line and it’s still using simple interest not amortize interest okay lines you know like once you pay it back you still then you can still continue it’s like like a HELOC or credit lines or simple interest in loans or amortized interests okay Chris okay so line a little bit I got it like it I like it so typically when you get a paycheck where does your paycheck first go before you pay any bills or anything like that taxes right yeah so you know the little gremlins come and take your money before you even see it yeah for those who have w2 jobs they don’t even see that money it goes boom right right right let any of the net income that comes to them where does it go typically goes into a checking account and then they just thread to the club so so this look at this right so most people put it into a saving account and then they shift it into savings and then out of there they pay for you know their mortgage payment out of their line it got it sorry out of their their checking account right so they pay the mortgage their car payments or credit card payment their lifestyle now what we do is we say you know what you Adam he already said it the interest on a savings account is point zero zero zero zero zero zero or whatever you know infinity like PI or whatever negative so where your checking account I mean I’ve seen like a few banks and saying those so like I will give you three percent you know a three percent interest on your checking account we got money adding and flowing in and out of there so much but that’s just their ploy how do you put your money with them but you’re they’re not you’re not making a ton because your money’s ebbing and flowing so there’s no interest that’s actually really occurring right so so what if we do this what if we take our five thousand dollar paycheck that we get every month and we put it into our checking account and then we pay off five thousand dollars on our line of credit so say in this scenario I have a twelve thousand dollar line of credit but I owe $12,000 nine well let’s look at what that does so if I go if I do that and I deposit oh and let’s talk about this – so if I got money going into savings and it’s not keeping up with the cost of living or I have my employer taking out too much money every month you know meet with your CPA meet with your finance you know meet with the CPA to figure out how much can we do without me having to come to the table with taxes at tax time but where I break even right because if you’re given with that money again it’s an interest rate loan to them you can do more with that in the scenario velocity banking than just giving it away so let’s say we quit putting money into savings and then let’s say we paid it pay five thousand down on our twelve thousand well that eliminates the $1400 here that’s going out the 600 out here because the five thousand councils our payments that $600 pain right so now we’ve freed up two thousand dollars a month in cash flow so what that does is if I have twelve thousand dollars on my line of credit and I pay it down from twelve I put in five that brings me down to seven right but we already know I still have to make my mortgage payment I still have to pay my car payment and I still have my life stuff right I got to pay I got to get food for my kids I got to pay for the clothes I got to pay for their sports all this stuff so that’s three thousand dollars so you remember we freed up two thousand dollars between the credit card payment and the money that was going to say am i putting those things back on my credit card yep so so for those of you who have a credit card with cash advance checks like we do we can use our cash advance check we can take that and you know send our monthly mortgage payments to our to our bank for the mortgage payments right so we can take a credit card did we have a fifteen thousand dollar line of credit on their credit card and every month I can write out a $1,200 a month mortgage payment on today but then every month I’m paying down my line of credit with my income so yes you’re gonna pay for your life out of there and some people you know like when your home equity lines of credit have the ability to write checks out of just like a checking account so let’s look at this so we’ve got twelve thousand deposit or five thousand dollars into it our paycheck then we have our living expenses so we have our our groceries or clothes or mortgage payment our car payment that brings us back up three and then you know the next month we put in five so so we go from twelve to seven back up to ten deposit our 5000 check that brings us down to five live again that brings us up to eight deposit our paycheck again at month three that brings us down to three in three thousand then we got to live again bring us up three grand so what happens in this case so people put money in the savings for myriad of reasons but one of them is for emergencies right so people like why would I do that when I you know might need my money well if we have an emergency in say month for sake ovid happened right take Cove it happened and you would already started doing your velocity banking okay we’ll crack I need living expenses well if your living expenses are three grand a month you have a $9,000 spread available on your credit cards here right or your line of credit to live off of for the next three months or let’s have an emergency and you can pay that off in six months right so now what you did was you effectively took $12,000 on your line of credit you paid it off in six months and that’s most of America has a pretty high credit you know they they have a lot of money on their credit cards anywhere between seven to fifteen thousand dollars so this is a good example to show like hey you know I know a lot of people were like in a Dave Ramsey and that’s great he has the saying live now like nobody else will so you can live later like nobody else will but living now like nobody else will I mean living on beans and rice I like steak I want to eat steak now I don’t want to wait 30 years to have the well-done Oh in this case we can have it paid down in six months then what can we do well that frees that well a couple things right so if you show that you can manage your line of credit typically the banks you can increase on your line of credit if you’ve shown that you can manage it Shannon has the best ever call to give you an increase on your savings account no no have they done it have they done it on lines of credit yes yeah in knows every time I go on vacation because they always up my limit like big fan vacations they always up my limit by like a couple grand like you jerks you just blew my budget but uh anyway so let’s go forward in here so now we have twelve thousand we have fifteen thousand dollars available on our line of credit right we showed we just showed you how to pay off your line of credit and say now what do you have available you have credit so what if you go in and maybe other cash advance check out of there or you have a home equity line of credit you write out a check for the bank that is screwing you over with their high amortize interest but you think it’s three and a half percent you’re paying nothing you’re writing twelve thousand dollar check to the bank saying hey I’m gonna pay off twelve thousand dollars in principle and you write that check and you send it off to your mortgage company I write that check out of my credit card out of your credit card or your line of credit or anything like that right so if you’re a lock which is a home equity line of credit or your credit card type correct so then what well now you got a twelve thousand dollar balance on your credit card again right yeah just follow the same process again deposit your paycheck in so you’re gonna the posi or five thousand dollar paycheck in takes you from 12 to seven back up to ten back down to five back up to eight back down to three you know back up to six you know down to one and so in six months you’re able to pay off twelve thousand dollars in your mortgage paint in your principal do you remember what it took you to do that the traditional way four years four years it took I would say I’m listening four years for you this example right so it took us four years to do the same so effectively let’s look at this so people like will you remember the 21 percent people get caught up especially I love presenting this to mortgage bankers and brokers because like well right there’s 21 percent interest on that $12,000 which I say Mike that’s exactly what’s been going through my I’m like well where’s the interest that you’re borrowing you’re like I’m paying back like your expenses are 3000 your calculation and in your example but then you’re adding in that extra funds of the interest now remember cent or whatever or a HELOC it’s five and a half five right now right so so you look at a simple interest for how a simple interest compounded simple interest is compounded on the daily but yeah like yearly the daily usage yes daily usage right so if you have a twelve thousand dollar bond and your month one you pay down to seven you’re gonna be charged on the seven thousand an interest not the twelve thousand and then every month that keeps going down so let’s look at this okay let’s look at twelve thousand dollars on your line of credit times twenty one percent divided by two so six months right because in six months we can have this line of credit paid down this is what you’re gonna pay an interest if you do not pay off that line of credit in six-month that’s what you’re paying interest so you’ll pay twelve hundred and sixty right but here’s what you will have saved correct so I don’t mass good all the time but is this less than this yes $1,260 of interest of that twenty interest you first forty or a thousand dollars in interest don’t I need to take twelve sixty times two times four to compare it to the forty five thousand over four years no small you just because you reduced twelve thousand dollars up so you did equivalent right so in four years you paid off 12 grand in six months you paid off twelve that’s you’re saying even though it’s a short of time I’m paying off the same amount right so you just did what took you four years to do and it only cost you $1,200 in interest versus forty five thousand dollars in interest okay that make sense Shannon yeah yeah I’m I’m getting there I’m getting there I like it yes so now let’s let’s break it down to my house right so with my house right I lived in my house for four years mm-hmm if I end I wanna clear I was paying myself exactly what this model was and my mortgage payments were the same my lifestyle was the same my car payments were the same everything was like almost like within a hundred bucks I’ll say within this model right so what sucks is we bought it in seven we didn’t get hit and hit till ten we had a short sell our house and women right so you guys as REALTORS® you know that say I have a $200,000 house right I bought it in 2007 and in 2011 it was actually worth less than what I bought it for right so I paid 200 we ended up short selling it was in great shape but we ended up short selling it for 170 that’s a $30,000 spread right I had only paid down roughly $12,000 in principle right now how much more powerful would have been for me to have utilized the line of credit that I did have available to me at the time to at least in two years roll it twice right so in two years there’s that’s four rounds that I could have paid it down right so in two years I could have paid it down $48,000 so twelve thousand plus twelve thousand plus twelve thousand plus twelve them so 48,000 Oh $48,000 you know take that off too much to just say fifty thousand take that off to two hundred thousand I could’ve still I could have short sold it myself and taking the loss rather than giving my credit decimated and walking away with absolutely nothing right I could have the old and gone the tech versus right and we know too that the average list to sale price plus closing costs and commissions averages out to be about percent right so if you have a if you have a $200,000 house and you go to sell it you’re going to pay ten percent between closing costs Commission list the sale price you know after you do all the negotiations you know the inspection ID everything like that right so so already people are in this case say they bought it for 200 now they gotta sell their house and they’re taking a $20,000 hit on all that and they’ve only paid down 12 grand they’re upside down $8,000 out the gate right now they don’t realize they’re upside down on $8,000 because four years prior they put down anywhere between three and a half to five percent so if they put down three and a half months on the FHA they’re gonna walk away paying $1,000 a closing if they put down 5% using Fannie Mae they’re gonna walk away with the two thousand dollar check it could but they’re gonna be like I didn’t walk away losing everything I’m like well you did you just it’s a delayed pain you lost it four years ago when you put it down so that’s assuming the market shift doesn’t shift you know but if the market shifts in a bad way people are even more spot if the market shifts in a good way okay great you got some that you got a little bit more equity traditions but let’s look at this scenario here right so if we’ve got the ability to pay twenty four thousand dollars a year down twenty four times four is what I know we’re doing math math today so we got 96 thousand dollars and four years my core math takes a long time you know so I know I know us parents are getting messed up now we don’t even know how to do math anymore yeah this common core stuff so in four years I you could have the ability to pay down ninety six thousand dollars now all those four years – we’ve also made 48 payments on our traditional monthly mortgage payments right so really what we’ve done is we’ve actually paid around paid off around one hundred and ten thousand dollars in our mortgage payments so traditional way pay down you know do your monthly mortgage payments like you do and you pay off twelve thousand dollars or run your bit run everything through velocity banking through your line of credit and you can pay off one hundred and ten thousand dollars again I don’t ask it all the time but one hundred and ten thousand dollars sounds a lot better than twelve thousand dollars doesn’t it yes even in common format it is right even in common format that still makes sense absolutely follow this pattern until it’s paid off in full in this scenario it would be seven point three years it would take you so the time it takes the average American to move they can have their house paid off in that same time so in that scenario it would take you seven years a little over seven years right to pay off the mortgage in its entirety correct now that’s if you’re disciplined right but life happens right holidays happen sometimes you’re like oh I can afford to not make this payment this month or I can afford to make the minimum of payment on the line of credit I’ll have to pop you know I want to free up some time on it you know and that’s where where I said at the beginning I’m like you can get into trouble with this I actually met with the St. Louis City police officer right before all before we went on lockdown and I showed him this he’s at home I gosh I wish I’d known about this when we had a lot of credit because we would have filed for bankruptcy we could have utilized this and we wouldn’t had to lose everything and to me that was heartbreaking and now his life you know like they touched the hot stove they don’t want to touch it again I’m like but you guys have credit cards with cash advance checks you can do it and he’s like we wouldn’t want to do that you know I get it yeah so yeah it’s so going to like I mean I know what your next slide is so the pros and cons I mean so the pros we kind of went through the cons though are that you just you really have to be very disciplined right well if so there’s the disciplined side right so you have to be disciplined and unfortunately most American is not and I will say if anything that Dave Ramsey is has done really good at it I mean look at America right look at what’s going on right now we have a sickness and it’s called debt not just the country not just like our government but like us as individuals we have a sickness with right we’re addicted to it that’s why people look at like how much can I afford versus how much equity can I get or what you know what’s the longevity of this investments that I’m going to put in this put my money into so right they the Commons yes you could get into trouble you most certainly could what’s great is our educational company that we have we actually have an app that we came out with that you can download on your phone I’ll going to Adam the resources so she can put them on so people can go and download the app but it really watches your like when and how to make payments but I really encourage people to get the allocation because the education will keep you out of trouble right the more you watch the education the better you’re going to get at honing this practice because and after a while it becomes a game like it gets super exciting to be like oh I can pay this down I can do this and then it opens up the ability especially when you start looking at rental properties like oh my gosh I can buy this house there Sorento house and have it paid off in five years and then that frees up cash flow and you can do a cash out refinance and buy more houses no I’m not quite clear on what you’re saying like trouble is is that where someone would like get a really high credit card balance and then not be able to pay an offer what’s the trade yeah so the trouble is you know I mean Kobe’s could happen right you got a job and now you don’t have a job so now you have this line of credit the other trouble is your banks could let lets go through all the things that could go bad right that could go wrong so you have you know you could lose your job and I will say in Adam you and I discussed this this is great for people who have studying right like the REALTORS®s it’s really tough for people that are Commission based that don’t have a consistent paycheck it is really tough but you and I have rentals so we can run our rental properties to do this and pay off the rental which then frees up more income for you and you know for you to get every month this as well as myself yeah that’s right I think that’s what’s been confusing for me and like you said as other people that have like incomes that do this you know and and I guess we could just figure out sort of a baseline income I know that I made at least whatever $3,000 a month and I can use that number if I wanted to and that’s where the discipline comes in right and then so the other trouble is is people who aren’t disciplined right give you are disciplined maybe something breaks on their house that costs a lot of money maybe their car breaks down and they have to make an investment in another car maybe they lose their job maybe you know covid happens in the banks you know on your home equity line of credit that I hey you’re not utilizing this whole line of credit we’re going to cut it down or we’re going to lemonade it all together you know they could close that your credit card payment your credit card companies could reduce the limit that’s available on there too so those are a lot of the things that could go on but let’s talk about what could go right you know gaining equity right the ability to build generational look you think about it this way seven years would you in seven years in this scenario Shannon would have paid off roughly $20,000 in debt in seven years versus being able to walk away with a with over a hundred grand they’re not even I’m sorry not a hunter grand almost 200 grand after commissions in closing what does that give you your seller the ability to do go buy another house they can go buy a house twice as much and put that same money down into it and still have the same payment they had before but now they got twice as nice about which you know it is great for you as an agent to be able to provide that service because a lot of our plan sir many of mine have been first-time homebuyers so just kind of getting the foot in the door with a small house but the intention being you know down the line five years to that seven year market upgrading to what would probably be a family home great well and that one of the push backs I get from first-time homebuyers is we’ll you know especially ones that have built up a pretty good little nest egg they’re like well why why don’t I just put that money down on my house and pay it off that I’m like well cash is always good to have on hand right in case of emergencies and if you have an available credit why not run it you share you know to this because if you spend your cash what do we have left available you don’t have any more cash if you utilize your line of credit and you start paying you down your line of credit with your traditional income what do you have available we already talked about that you have available credit that was interesting to me it’s like if I’m gonna buy a let’s just call it a hundred thousand dollar house and I have the 20% to put down I’ve got my 20 grand should I instead put down five percent five thousand and then month one put down that other fifteen thousand am I like are like pay my first mortgage payment with the fifteen thousand dollar check is that saving me interest it does yeah so what it does is it accelerate anything that’s why it’s called velocity to accelerate to the payout but then devil’s advocate here though because if he goes to that 20 percent or if he doesn’t pay that twenty percent then you still have the PMI and that doesn’t go away unless one you hit twenty percent they you hit that twenty percent or and some banks have a minimum timeframe I mean so so I mean here the thing is is it to work in every scenario and it’s going to yes it could is it going to work perfectly in every scenario not really so I mean it’s in Adam was he and I were talking the other day he’s like what if I have like a hundred thousand dollar credit why can’t I just chunk down big chunk of them like there’s actually a careful balance between your available line of credit and what you can what you should utilize to chunk down you know those big payments and that’s what I’m saying the Renata sab would help people figure out how much so they’re right correct correct so but and again going back to the education the education is going to help you it’s great to have you know an understanding it’s great to see how it works but it’s better to have an understanding of how it works right and that’s why I like my wife and I were such big advocates for this education because it’s really helped us I mean we took a six-year car payment and cut it down to 13 months which saved us like $4,000 in interest people like why would you do that with your car well at the time we didn’t have any other personal debt because everything else was owned by the businesses so we’re like we’ll just run it through there and you know watching it now it’s depreciated so fast but at least it saved us four grand in interest and it didn’t need to change our monthly expenses or anything like that it just changed for a month our war money flows because our reason you wouldn’t do it on the deads for the business no I would do it for the business so we actually have another course called advanced velocity banking and that is solely for businesses whether they are real estate businesses regular business I have a I have a massage therapy clinic that utilizes it for their business they actually they own a bunch of franchises they have like a 1.3 million dollars in them and they’ve been using it for the last year and so they’ve eliminated I think it’s like half a million dollars in debt in just a year by flowing all their cash flow through their do that like sort of antsy when we talked about this because I’m still not doing it and it’s like great you know we’ve been talking about it now for a block a couple years and I’m just like how am I not doing this it’s like I gotta hang up now and go pay off something with my new line of credit and I think it’s more people have this fear of it that’s why the education is so important because the concept of it sounds great right the concept of it sounds amazing like Oh for years I could walk away with a hundred reimburses walking away with two or losing a thousand oh I can walk away with seven grand or with 200 grand in seven years instead of you know 10 grand after commissions and everything so you know it’s people get so excited like they come to our meetings that come to our presentations they get so excited and then though you just like you know it’s like they find out they’re in Eagle they’re hanging out over the chickens and then they walk home oh oh this thing you said they’re saying the other day what is this thing about the Eagles and the chickens so I come to your class I become an eagle you’re an eagle to begin with okay this whole time you come to the Clutton you come to the introduction you come to you know what we’re talking about and you like you find out you’re an eagle and then you leave the meeting so anyway at home and then two days later back at chicken again right and I’m walking not right because life happens right things come up and you get your mortgage bill in the Dominion on the mail you get your phone bill you get all these other things and it totally takes away from your ability to like focus on it and that’s why the education is so important because it gives you that structure like to like me I say it gives me the ability to geek out like oh my gosh like implementing it it’s so key and paramount so tell me this thing okay hanging out with chickens which I take personal offense to that like Adam and I hang out with all chicken his wife are personally offended you guys are you guys totally go okay you know where the kid I just when I served a mission with on my church with that this Mongolian guy that I served with and he was trying to learn English and he didn’t quite get it but we were gone by this University and they had these cross country girls and he’s like his the guy who started teaching him English before me taught him to say hot chickens instead of saying hot chicks so we were going by he’s like cloning all these goes like hot chicken hot chicken so yeah I’m you just working with a lot of hot chickens in your office no coming but I do like this so now I think I get it though in terms of the question of why not use the cash versus it’s the same concept that you use an investment real estate is we’re using someone else’s money to kind of build back wealth so you’re just using someone else’s money I eat the credit line of credit or the he like the home equity line of credit to pay off other debt and then you keep your cash I mean to buy to invest elsewhere or to have off to the side for emergency funds and stuff so I am definitely in that camp of keeping the cash and using credit to help benefit you if you’re truly a disciplined personality right so like my mentor insider oddity you know he says he’s got you know at any point you always make sure that he has twenty thousand dollars in his business and twenty thousand dollars personal just for emergencies right okay Jed I’m like quick access for but that he’s always utilizing the line of credit and my crush we one of our credit cards we use actually we get points on so you know we get to use that in that page for our date night I wanted to ask you about that I didn’t want to interrupt you earlier when you write to check the cash advance or whatever from your credit card you get points on that Oh mind us I don’t know if every card does that but mine does I thought about Matt I thought about that exact thing it’s going why am I not paying my mortgage by the way with a credit card I mean but you can’t pay a mortgage with a credit card but you can I guess technically do it with Josh no no here’s the but here’s the other thing people can consider too if you got student loans they’ll take the credit card for payments if you got caught it depending on who you’re oh yeah mm-hmm depending on who your car loan is with mine they took my credit card you know Mike Mike ally financial took my credit card for PayPal I did their bank now you have to call it you have to call in and do it they don’t have it available on their website but you have to call in to do it what did they charge they’re like a little beard something don’t they yeah but you figure it’s a couple bucks to save me $4,000 in interest that’s minutes long game game and I’m gonna get the points back there’s a couple dollars you know the two dollars or what out of two dollars and fifty cents I think in this process I’m gonna get that back because my car payments you know 500 bucks you know two dollars and fifty cents I thought they charge any like a percentage of something processing fee though because they could they charged it like a like a Western Union type a type thing okay so do you have more slides or kids it’s the time when we just start hitting up with random questions random question all right so my buddy who I was talking about that I was saying that is uh he’s using velocity banking to paid on his credit cards and then he’ll pay off his car and then he’ll start paying off his rental properties that he has he was mentioning something called an all-in-one loan have you heard about this can you tell me anything about those I not familiar with us yeah I mean unless he’s talking about like a summer there are some banks that do first lien position to home equity lines of credit yeah yeah something like that something like that he called it an all-in-one loan but he started saying words like first lien position or whatever right so so they there is a few banks there’s a few mortgage bankers here in St. Louis that I know I haven’t talked to them since you know the lockdown but I right right before we actually had breakfast with one of them my wife and I did you know start utilizing them to market into our with our students inside the education so I’m not as familiar with them I’ve got a buddy that’s in Grenada that’s in Hawaii he utilizes them heavily a lot of those are geared towards private residences I haven’t found one yet that’s for prayer for business so okay so does your like so my it’s a credit union that I get a lot of my mortgages from for my rental properties well they like hate me if I start doing this or not want to give me any more loans or today no I mean the thing is like people like oh I had one person say at one of the presentations like is that like legal and ethical and and I feel so bad for the banks I’m like why do you feel bad for the banks cuz I didn’t say that I just wanted a member from of it let’s do the math on that right so let’s do them let’s do the math on that right so $45,000 that we paid in in four years and then we paid $12,000 in interest rate you are paying effectively two hundred and sixty six percent interest in those same four years yeah so that’s the deal right we didn’t try it we didn’t quite make like a chart for that but you paid 21 percent simple interest on your credit card but in even though your mortgage is three point five percent interest that’s over 30 years so the freshman the first month like you’re saying you know if you’re paying thousand dollars a month and you know 100 of it is principal and 90 of it is interest that’s a hell of a lot more than 3.5% I don’t know the math on it is it’s not 90% I guess but it’s it’s way more than that 21% and so then you need to like kind of figure out how old your loans are don’t you write where you would do this and yeah yeah it’s definitely better towards your news so like my cousin I was out and Arizona a year and a half ago and I stayed at his place and I was breaking it down for them they they were 17 years into their 30-year mortgage so they’re on the downhill side right they were close to where you know they could do some velocity banking and it would probably save them a couple thousand dollars but they just brought a brand new mini man that was like 50 grand I love man and I was like what’s your interest on that he’s like 7% like you’re gonna pay him more than the I think 2 grand we did we figured it out it was like 2 grand or something like that and interest by the time because he was finally just hitting that point where he could just start attacking the newer loan first and now he’s on to doing he’s already paid off and now he’s doing the other thing and that was back to his home mortgage instead but even if he has only 13 years left in his mortgage it still makes sense to do it I’m as presuming ya know I mean it still does but it also makes I mean he can do a blend of everything – I mean he had enough line of credit he had enough income to where he could do blended kind of velocity banking on each right so a good chunk over here and a good chunk over here and he ended up income to pay down that that line of credit we are sharing this live in our Herman London like agent Facebook group and so someone was asking what is a good bank or credit card that they should do this with um so the thing is when you go to a bank and you ask for a line of credit typically they’re gonna give you a loan application and you say no I want a line of credit and it will take you a little bit to get through a few people to finally get somebody who knows exactly what you’re talking about Eli I need to verify if it’s amortized or simple interest right all key locks are created equal ha and so any luck is it I thought yeah because I’ve had a couple I mean so but I think they’re all simple interests in the most part of them we have credit technically correct correct most of them are I will say a majority of the whole method lines of credit that’s why it’s a home equity line of credit right low enough credit so right um but just double check that because if it says loan application on there they’re typically going to be throwing you into a loan and then what’s a like do you want to share what credit card you think is good and has like the cash advance and all that kind of stuff I mean we have capital ones we so we have capital ones and we have a Capital One they’re the spark cards for our business that we can do that with as well I will tell you this the the spark cards they actually tie to your personal credit so if you load them up really high it will mess up your debt to income ratio so if you’re trying to buy a house or anything like that that’s um that’s one of the other comes we didn’t talk about was you know people who are looking to buy a house if they load up their line of credit and don’t pay it down soon enough before the billing cycle ends then that could impact their credit score so it is a careful balance and it depends on what your goals and your objectives are so if you if you in mind it would be helpful I think if you would take your credit card out and show the front and back of it for everybody I was just doesn’t two chases it I get those checks as well from Chase I have a chain if you don’t and if you don’t have them or if they’ve never given them to you can always call and ask you but if your credit card company if they happen asking for credit card that means yeah we’ve had a few people in our community that has they didn’t have those cash advance checks and so we just said hey just call your credit card company and see if they offer them and then they offer them and sometimes they’re even 0% then you charge like a 2 or 3% processing fee but they’re 0% so it’s not that case for everybody but in some cases there you wonderful all right I don’t know I think I could probably think of a thousand more questions if I wanted to I know I mean this has been awesome to actually run through some examples just because I’ve heard about it I knew that it was there something huge benefits potentially from it but I also knew that there was risk and I just didn’t know what the risks were and but at some time like it it took me watching our course three times to really really grasp it and then once I grabbed some like holy crap now we got to get on this right third time I’ve gone through this with you so maybe I’m finally getting it maybe I’ll actually do something about it like share with the people your contact information if you’re willing to have people contact you and then also do you still hope I guess not right now but where you were hosting kind of like a real estate get-together type of thing that’s what I know and so we so we typically he’ll hold our introduction meetings to the education every Tuesday night we’re shifting that to Thursday we’re actually joining our we have communities all over the United States so we have we’re going to be joining up with some of our other communities across the United States just so people can get a different flavor of different markets and things like that see what people are up to across the United States and that serves as an introduction they typically cover velocity banking like I did today and then they it’s it’s typically an hour and a half long going through various real estate investing aspects when we get back to normal ish I guess we’ll get back to doing we were doing cash till game nights once a month we do property house tours with those that are part of our community that had the education we do a lot of pics in clip house tours the Bluebird house tours will do we’ve done a few Airbnb house tours we’re going to pick start picking that stuff back up and doing virtual tours coming up in the next couple of weeks so you guys can keep an eye out for that rule so so yeah everybody’s welcome to to reach out connect with me if they got any questions or whatnot we’ve got a myriad of different resources that we can play get you what’s your phone number email website and all that yeah how they find you so here I’ll just do this I hear Jax the dog Shannon here he comes quit click click click you hear the little nails alright so I just do this for a quick sorry good say I would go to my bedroom and hide within the kids and the dog stand out there and scratched at the door and pound on it so it’s no better no matter what I do it’s all good no there’s my contact information right there I just figured pull it up in the email donation aficionado I by the way okay I had a client in 2011 he was a wine aficionado we did this house on them on floor place down in Shaw and we finished the project he’s like you know what you are like birthdays like you’re the renovation to fishing I don’t like done like mine Adam we change our business cards to real estate aficionados well we I had a similar situation and a friend told me that we are approachable professionals I had a client tell me I’m you have my Christopher Walken moments where I walk into a house and I get into this mode where like I would envision what it could look like I mean I can look at the nastiest ugliest house walls and missing roof is missing things are caving in and I could envision what it would look like I mean this picture that’s behind me it obviously is not sitting but this is one of the houses that we did and it was a nightmare before so but I would get into these moments where my clients like you know human might remind me of when we walk into these houses and I’m like what that she’s like you remember me Chris were walking with I mean it’s more like Rain Man or a beautiful mind or something look film was Christopher Walken in that they’re talking about hey just like his personality and like his mannerisms and stuff like that so we just took it we just kind of ran with it with my team and they’re like Mike’s I walk in the houses again cool alright well thank you very much mr. pulley we appreciated quality time today and we hope to I hope to kind of use some of what I learned today and hopefully I listen enough not to be in the con category great your discipline I believe in you Adam thank you very much we appreciate it and I’m gonna go ahead and end the meeting have a great day everybody all right thank you thank you somebody
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