What are some mind-blowing ways to access capital that you may not be aware of—where the money is 100% tax-free and you don’t have to report it on your personal credit and FICO score?
In this episode, Toby Mathis of Anderson Advisors talks to Geal Talbert, Vice President of Wealth Management at UBS Financial, and Dan Ollman, Executive Manager – Anderson Funding Community, which helps people get money for new businesses as well as for flippers from non-traditional sources.
Geal and Dan are two experts in the realm of other people’s money (OPM) and how you get access to it.
Geal’s specialization includes advanced planning strategies for tax minimization, estate transfer, and business exit planning to ensure clients maximize the net proceeds from the sale of their business.
DISCLAIMER: The rates mentioned on this podcast change regularly.
- Rampant Inflation: At almost 8%, now is not the time to sell assets to pay bills.
- Why sell when you don’t have to? Instead, you buy, borrow, and step up in basis.
- Security-backed Lines of Credit: Different investments have different line maximums.
- How long does it take and how much do you get? Depends on quality of equity of stock.
- What could go wrong? You’ll have to come up with more cash or sell to cash.
- No Cost: What does it cost to get a line of credit? Do you pay for points upfront?
- What does somebody need to have in their account to qualify for a fixed rate? $25,000
- Private Money: If assets continue to grow, then dividends are used to pay back loans.
- Non-revenue-producing Business: Brand new companies/startups can get lines of credit.
- Line of Credit: Get credit when you don’t need it. You never know when you’ll need it.
Dan Ollman Phone: (800) 706-4741 x 270
Dan Ollman Email: firstname.lastname@example.org
1-on-1 Consultation: https://calendly.com/anderson-funding-community/
Full Episode Transcript:
Toby: Hey, guys. This is Toby Mathis. In this podcast, you’re going to meet Geal Talbert who is the Vice-President of Wealth Management at UBS, and a phenomenally successful and bright financial professional. She’s going to be talking about security-backed lines of credit and how to access assets without having to sell such assets.... Read Full Transcript
Also joining us is going to be Dan Ollman who’s an executive manager here at Anderson and oversees the Anderson funding community, where we help people get money for new businesses as well as money for flippers and money from non-traditional sources, everything from collectibles to securities, to revenue streams, to even factoring of assets.
Between the two of them, they’re going to show you some pretty mind-blowing ways to access capital in ways that you probably have never heard of, without reporting it to your personal credit. It’s not going to your FICO score and harm you in any way, and the money is absolutely 100% tax-free. So enjoy.
Really lucky today to be talking with two experts in the realm of OPM (other people’s money) and how you get access to it. First off, Geal Talbert, welcome.
Geal: Thank you. Good to be here.
Toby: Oh yeah. It’s going to be great. Now, Geal, you’re over there in Honolulu?
Geal: In Honolulu, yup. Downtown right now.
Toby: Don’t give me the stink eye. It is beautiful over there right? Is it raining or is it beautiful?
Geal: It is beautiful and warm.
Toby: And Dan. Dan, you’re with me here in Las Vegas, right?
Dan: That’s correct.
Toby: It’s still beautiful and warm here in Las Vegas.
Dan: It’s a beautiful day.
Toby: It is a beautiful day. We get a little bit of wind. You won’t be able to see because the dust will be everywhere, but it will be warm and sunny up above us. Except the dust cloud over here.
What’s the guy from Peanuts? Linus or whatever?
Dan: Oh, Pig-Pen.
Toby: Pig-Pen. All right. So Vegas is Pig-Pen.
Let’s dive right on in. I’m just going to set the table real quick. If you are somebody who has assets and somebody is telling you to sell said assets to pay any bill, whether it be taxes, pay-off somebody, to buy something, don’t do it. Right now, we have rampant inflation. When I say rampant, they’re saying not since 1982. We’re at close to 8% as we sit here today. That is so understated.
I don’t want to bug Geal and Dan on this, but if we use the same methodology for calculating interest as we did in 1982 and we applied it today, we’re over 15%. What that means is that your cash is melting. If you turn something into cash, that’s not a good thing. We don’t want to turn things to cash. We want to borrow against things.
Last year if you remember Elon Musk, he sold off some shares of Tesla. He asked Twitter should he sell some. He sold some. Otherwise, they were mad at him. I think it was Senator Warren who was giving him a hard time because he didn’t pay taxes. So he sold off a big chunk.
Most wealthy folks are not in the habit of selling off their assets, especially if they’re producing assets. They borrow against it. And we have a phrase: You buy, borrow, and then die. You step up in basis, and you can sell that thing tax-free—your heirs can’t—and nobody ever pays tax.
Geal, I’m going to put you on the spot, and say is that fairly accurate? Because you probably deal with a lot of really wealthy people over there in Honolulu, where a house is probably $10 million to get started. I’m just teasing you. It’s probably […].
Geal: Absolutely. Why sell when you don’t have to? We’re always borrowing. I had a client just buy the property under his restaurant for $2.6 million. It was a phone call. $2.6 million and we wired it out the next week.
Toby: Now, you just made a bunch of heads explode. Is it okay to say who your employer is?
Toby: Go ahead and say it.
Geal: I work for UBS Financial, and we allow our clients to borrow against their security. Just like you borrow against your home, a portfolio of securities made up of stocks, mutual funds, bonds, CDs, and even cash, as long as we have it set up—it takes about a week to set that up—it’s a phone call and we wire the money out.
Interest rates, right now we have a special one-year 1.99% on a fixed rate. Three-year fixed rate at 2.79%, and a five-year fixed rate at 2.99%. This client ended up doing some at three years, some at one year. He had cash that was sitting there, so we sent that over. It was a phone call and it was wired out within a week.
Toby: We have to break this down. Everybody else out there is under this assumption that I have to go get a mortgage, I have to apply, it’s going to take 30–40 days, they’re going to run my credit, they’re going to make me supply every tax document that I’ve ever filed plus some that I haven’t. It’s a very intrusive process.
I have to […] all my life, I’ve got to sign a tax transcript notice so that they can pull and verify that what I’m telling them is true and all this stuff, and you’re talking about, in many cases, 45–60 days on a commercial loan. If you’re buying a restaurant, I would say it’s probably about that. You’re telling me that they got the money in a week?
Geal: Yes, they got the money in a week. We already had their assets and their account at UBS. We already know that they’re approved for a certain amount.
Different investments have a different line maximum. For instance, stocks are up to 75%. Mutual funds, depending, like a bond mutual fund, we’ll loan up to 90%, minibonds up to 95%, corporate bonds up to 95%. The US Treasury is 90%.
Toby: Hold on for a second because this is new even for me. I’ve loved security-backed lines of credit for a long, long time. Actually, I’ve been advocating them for more than a decade—a lot of people don’t know what they are—probably longer, probably 20 years now, but I’ll pretend like it’s a decade. You can borrow up to 95% of some portfolios?
Toby: So if I’m an investor and I’m buying mutual funds, and I’m buying some tax-free B&Es, I have an investor who’s telling me to do some ETFs or things like that, and I get some stocks, and I want to have my Starbucks, my Costco, my 3M, my HP, whatever it is, that I have this portfolio, you’re telling me I can borrow 75% of that?
Geal: Yes you can. It depends on the quality of the equity, of the stock. […] traded might be a 50% loan, but your Costcos, your Wallmarts, are going to be up to 75%. We come up with the line based on the mix of assets that you have in your portfolio. Once you’re approved for the line and we do full credit, it’s a phone call after that.
Toby: So you have a line of credit. Let’s say I had a million dollar account and I had just regular securities. If these are blue chip, good companies, I’m going to have up to $750,000 that I could pull in at any time?
Geal: Yes. The only limitation on what you spend it on is you can’t use it to buy more securities. You can use it to buy real estate, you can use it to pay for gifts. Taxes are what we’re seeing a lot right now (sadly). As long as you’re not using it to buy more securities and art portfolio, you’re good. You can use it for your business, student’s tuition.
Toby: Let’s just be real. Let’s say somebody in Hawaii sold a security they’ve been holding onto for five years. They would have long-term capital gains rates, which would be 20%, plus 3.8% for the net investment income tax if it exceeds a certain threshold. Then your state tax is what? About 5% or 6%?
Geal: 7.25% for capital gains.
Toby: You’re talking about a 30% haircut if they sold the security, as opposed to just borrowing against the security?
Toby: Now, let’s talk about what could go wrong because I want to be fair. Some people out there probably never heard of this before and they’re saying, why didn’t my broker tell me and all that fun stuff. What could go wrong?
Geal: The market drops like it is right now and you have a margin call. Let’s say you have a million dollars. Your credit limit was $750,000, which was 75%. Then the market drops 25%, and now you’re at $750,000. Your line is 75% of the asset value. So you’re either going to have to come up with more cash or we’re going to have to sell to cash to bring down that 75%.
Toby: And that could be pretty painful for somebody if they had to sell. You’re selling at the bottom. If the market all of a sudden drops 75% and you’re borrowing at… but it’s only if you used it, correct? If I had a $750,000 line of credit and I used half a million, I would probably be pretty safe under those circumstances?
Toby: I’d use the rule of thumb of borrow half of the asset. I usually don’t go above. I do that because I live in Vegas and I watched our home values drop 75% in 2008. So I’m always like, you’re never really safe like everybody says. Oh, I have a lot of equity.
Geal: At the moment.
Toby: Yeah. What else could go wrong? Is it really less than 2% for a year to borrow?
Toby: Do you have to pay that back within a year? Or are you having to pay big payments every month? What’s the rule there?
Geal: You need to pay the interest. It’s an interest-only loan on the fixed rates, and it’s a balloon payment at the end. What people normally do, we always have a variable rate and a fixed rate. The variable rate will depend on your line. For instance, if you’re at a hundred thousand, the variable rate is going to be about 5.16%. If you’re at $2–$2 ½ million, the variable rate is 2.66%. So it just depends.
What we do is we try to get the line of credit for the maximum amount based on your portfolio. You don’t have to use all $2.5 million. You can just use $25,000, but you’ll be at the lowest rate if you wanted the variable rate. If you want the fixed rate, which is 1.99% per year, then we use that. At the end of the year, it’s a balloon payment. If you don’t have the full amount to pay off, it moves to the variable side.
Toby: Let’s say I have a line of credit for $750,000 but I only use half a million of it. I have to pay that half a million back at the end of the year at 1.99%, but I’m paying the interest as I go. In that case, what would that be? About $10,000 of interest for that entire period of time?
Toby: But I pay the interest as I go, right?
Geal: You pay the interest as you go monthly.
Toby: So $800 a month, and at the end of the year I need to come up with the rest of the money. If I can’t, then it goes to variable?
Toby: Okay. How long can I do that for? Is there a set period where you have to pay it back?
Geal: No. The variable is ongoing. It doesn’t necessarily have a minimum payment because if you don’t pay the interest that month, it just gets added to the balance. The amount that you pay can be any amount. You can pay the interest and principal. You can pay nothing. It’s very flexible. The rate does vary everyday. It doesn’t, usually, but it can.
In an interest rate environment where the interest rates are going up quickly, you might start out with 4% and at the end of the year it might be 4.5%. That’s why people will stagger it. They’ll pick up the three-year fixed, one-year fixed, and the variable push-in. That way, they can plan to pay down that variable push-in as soon as possible, and when the one-year comes up, it rolls into the variable.
Toby: Does it retroactively adjust like what they do with consumer credit cards where you can have 0% and then it reverts to 18% if you haven’t paid it all off? Is it like that where it moves to the new rate? Or are you at 1.99% for that first year period?
Geal: Yes. The fixed rate is 1.99% from the time you started. The three-year 2.79%, five-year 2.99%. If it’s more than $5 million, then you have no interest rates, but it’s fixed. They’re not going to change it based on not paying. But you do need to pay that interest rate.
Toby: You do have to pay the interest. Otherwise, something bad happens to the…
Geal: What happens is they’ll borrow it out of the variable bucket. Every fixed rate comes with a variable bucket. If you miss payment, they’re just going to tag it into the variable and make that payment for you.
Toby: That sounds so customer-friendly, Geal. I just laid up with you. Is there a lot of cost to get this line of credit? Like are you going to pay two points upfront? What does it cost to actually get this line of credit?
Toby: Oh my God. I’ve been talking about this for years. I’ve had clients do this, and I don’t like Merrill and some of the others. They would charge.
Toby: Yeah. Some other people would say like, oh my God. They told me the interest rate was this, but it really was much higher. And you’d hear some of those. Even on my TikTok and YouTube, I get some people commenting, mine’s at 5%–6%, and they told me it would be 3%, stuff like that. It sounds like some other companies might be playing less consumer—
Geal: The variable rate will vary. There’s a possibility where you start out with 3% and at the end of the year it’s 4%, the variable rate on that bucket.
Toby: They don’t qualify for the other ones. Maybe there are other […] but in this particular case, what does somebody have to have in their account to qualify for a fixed rate, 2%-ish?
Geal: The minimum draw’s $25,000. I guess you have to have $50,000. We don’t normally have a […] at that amount, but—
Toby: You’re not going to have somebody with $10,000 come in there and say, I want $7500, right?
Toby: It’s going to be larger. Just to be straight with people and very real. You need to have a seasoned account to get access to these. And then it doesn’t report to your personal credit, right? This is something that is completely off the grid as far as…
Geal: Yup, private money.
Toby: What’s the longest you’ve seen somebody use money like this? Do you have clients that have been doing it for a decade or longer?
Toby: I always get this. People are like, you have to pay the loan back, or they write things you don’t understand. The asset’s continuing to grow.
Toby: So you’re paying 2% interest but that $100,000. Let’s just say you borrowed a hundred thousand and you’re paying 2%. You have some piece that’s been averaging 13% a year for the last 10 years, 7% since it’s history.
Geal: Exactly. And your dividends often are used to pay it anyway.
Toby: Oh my God. You even think about… Wait, wait, wait. You’re getting the dividends—
Geal: […] the account and we use that to make the payment.
Toby: That is so cool.
Geal: The thing that’s important to know is that it doesn’t work for IRA accounts or QRPs, or if you have annuities or if you have REITs, we don’t borrow against those.
Toby: Can you do it out of and LLC that’s just you and your spouse?
Geal: Yeah, as long as it’s just in your trust, it’s in your name, it’s just stock, it’s mutual funds. Things that are not mutual funds in a 401(k) or mutual funds in a SEP IRA cannot be in an IRA or qualified plan, and it can’t be in an annuity. Anything other than that.
What we have is a lot of people who might inherit a portfolio or stock in their parents, and even though they got a step up, maybe it was years ago but they still don’t want to spend it because they don’t want to cash it out—they’re getting great dividends—and this allows them to go and diversify. Go and buy real estate, buy other things to grow their portfolios.
Toby: A lot of people don’t realize dividends grow. If you have a company like Coca-Cola or something and it’s paying an interest that you’re being charged on a line of credit, give it 10 years. That dividend’s likely to be twice as much. They grow just as fast as the stock grows. Let’s just say it’s 10% a year. Every seven years that dividend’s going to double. Now you’re making money on top. You never have to sell it. That’s the whole thing. You never have to sell it. You never lost control of the asset.
It’s a good asset protection technique, too. If I have a line of credit against my securities and somebody comes along and tries to take them, sorry. There’s not much—
Geal: How would they know that you have it?
Toby: They don’t. Maybe an ex-spouse. Maybe I had to sell it. I have a portfolio, but it’s got a mortgage against it.
Anything that I’m missing here? Because mind just thoroughly blown. As I said, no brainer if you’re a high net worth person. I do not know why people aren’t doing this.
Geal: Absolutely it’s a no brainer. If you are at a firm that doesn’t offer them, then you might want to just switch. Like I said, it takes maybe a week or two for assets to transfer from another firm in, but before you do that, I can tell you based on your statement, based on what you have, what amount the line would be, based on the type of investments that you have.
Once we sign the paperwork to transfer it, it takes 1–2 weeks. And then for the SBO to be approved, maybe one more week—maybe. I think the fastest we’ve done it is in a week-and-a-half.
Toby: Wow. So I’ll put your information up here. If somebody’s sitting in New York—obviously the time difference—can they still call you or do you only work out in Hawaii?
Geal: We operate in all 50 states.
Toby: See? Easy-peasy. That’s it. I’ll make sure your information is out there. Dan, you’re listening to this, and you’re an asset-based lender. I’ll just be real straight up. The three of us, nobody’s sitting here telling you to get a regular mortgage. Nobody’s sitting here saying, hey go get a bunch of credit cards in your personal name, because it screws up your FICO, right?
Use things that don’t report that if you have debt, you’re not sitting there. The rest of the world doesn’t see it. It’s not transparent. Here comes Dan and he’s also an asset-based lender. You do private companies, too. We just talked about having a portfolio of publicly-traded companies, mutual funds, bonds, things like that. Can you do what kind of Geal is doing but on your own company as well?
Dan: Yes, you can. And before I get started, I’d like to thank Geal. Like you, Toby, I love these security-based lines of credit for over a decade. It’s just an awesome way to tap into your asset and get liquidity. But yeah, there is a way. This may blow your mind too, Toby, for a non-revenuing business, to obtain a business line of credit that does not show up on the business owner’s personal credit.
Toby: We have to break that down. You just said non-revenue-producing business.
Toby: A brand new business is a non-revenue-producing business. I just set up a company, it’s not doing anything. Does it have to have assets or could it just be a company that’s just sitting there?
Dan: No. It just needs to be an entity with an EIN. As you know, Toby, most business lines of credit are based on business revenue. That’s what traditional lenders use. But we have a service provider that can obtain 0% lines of credit in your business name that does not show up on your personal credit.
The qualifications are this: they do look at your personal credit. You need to have at least a 700+ FICO score on all three bureaus. The lower your credit utilization, the better. So the higher your credit score, the lower the credit utilization, the more money you can obtain in these lines of credit. Even startups are okay.
The lines of credit we see are anywhere from $25,000 to $250,000. And that’s per principal business owner, meaning you have a partner or you’re a married couple, and you’re both involved in your business, you both can get lines of credit from $25,000 to $250,000 just showing up on that business credit.
Toby: Again, mind thoroughly blown. Non-revenue-producing company. It’s basically using your credibility. It’s looking at the owner’s credibility, saying we think you’ll pay this back because you have decent credit, so we’re going to roll the dice on you.
Now, why would somebody do that, Dan? Wouldn’t they just use the cash that they have? Maybe they just did what Geal was talking about. They pulled some money out of the line of credit and they funded their business and they’re ready to get started. Why would somebody go through the trouble of setting this one up as well?
Dan: A lot of our real estate investors use this. Even when you have a hard money lender using other people’s money, maybe they go up to 90% and you still need your down payment. You need to pay the interest payments for the term. You have closing costs, maybe some rehab. They have skin in the game in real estate. This is where we see a lot of these lines of credit going to real estate investors, although can be used for any business.
Toby: Wow. And it doesn’t report to your personal credit?
Dan: No, and that’s the most beautiful part. When you get lines of credit in your personal name, whether it’s traditional lines of credit or personal credit cards, when you utilize that credit line, it really tanks your FICO score. In fact, it prevents you from getting rights from hard money lenders to lower your FICO score.
Toby: It is […] 2008, 2009, and 2010. I remember this when people would get behind on their mortgage and would cause them to lose their line of credit in their business, because there was no difference between the business and the individual. Is this a way around that to where they have a business line that’s separate enough from the individual? Let’s say you’re utilizing the whole business line. It’s not going to take your personal credit so you can’t refi your house?
Dan: That’s correct. One of our clients here at Anderson has been paying $239,800 in these 0% lines of credit. Last year, I kept tabs at what the average Anderson client was getting through the separate provider. It averaged at $74,000 in 0% lines of credit—cash lines you can use—and […] of them got over $100,000.
Toby: And that was 0%?
Dan: It’s at 0%. It’s 0% up to 24 months, 9–24 months. These credit lines come in the form of business credit cards. Business credit cards are unsecured. There’s no collateral attached to it.
Toby: But you have to pay it off within that period of time, right? This is not something I can sit and not pay back for 10 years. This is something I would have to pay back by that year or two year.
Dan: Yes. It’s best used during the introductory period, but we do have flippers that do this. I can talk about engaging the company, but since this does not show up on your personal credit, if you were to get stuck with (say) $50,000 and you’re in a middle of a flip, and the rates change from 0% to 15%–18%, you can re-engage the company, get another set of 0% interest for 9–24 months because it’s not going up on your personal credit. Your credit should stay pristine. Then you transfer it over, and now you have another 9–24 months. We have flippers, real estate investors doing just that.
Toby: That’s pretty wild, too, so if you’re short in capital. I used to do where I would buy a CD and pledge it as security on a line of credit when I’d open up a company, so I could establish the credit for the company. It’s no different than meeting them using my cash, except I want to establish the line so that it would have some experience, so after two years I didn’t need to have security.
That’s kind of my MO, would be to open something up, move to another one, open that one up, move to another one, so that I could use money that wasn’t requiring my signature on it anymore. I didn’t have to worry about my personal credit associated with the business. Usually, does it take about two years before they’ll let you do that sort of thing?
Dan: Yes, it takes a couple of years. Now, a lot of people may be wondering. Dan, how do I buy a piece of property if I […] 5–6 credit cards? How does that work? It’s hard to imagine going to the closing table with a bunch of credit cards. But this service provider will show […]. I’ll introduce you to a third party that charges you a nominal fee, 3%.
What happens is, say you need $80,000 cash to close on a property. All you have is $120,000 in lines of credit with various credit cards. This company will charge you $82,400. They keep $2400 and send the $80,000 to the escrow company or the seller—whoever you’re directing the funds to—and they will do it by check, wire transfer, ACH, however they prefer to get paid.
Toby: This is using other people’s money. We’re still sitting in a situation where interest rates are still really, really low. There’s been a lot of talk about mortgage-based rising, but we’re still at historic lows. We’re not at the lowest phase which was last year, but we’re still like 2019 money, still ridiculously low. It sounds like there are lots of lenders out there that have their fingers into some pretty inexpensive money that are making a lot of these things available.
What other types of assets will they loan on? I’ve always kind of laughed because I’ve always thought about people that invested in art and things like that, but you could actually lever your art if you needed to into cash, too. Don’t sell it if you need the cash. I don’t have to go sell my favorite painting. Can I use it as collateral and borrow against that, too?
Dan: Yes. We have access to luxury hard asset lenders and they use the asset as collateral for a loan. These loans are usually short-term—one year to three year—and the interest rate starts around 12%.
Toby: They’re higher amounts. It’s just going to be painful, but it’s still better than dumping your favorite possession.
Dan: Sure, and they go up to $10 million. Obviously, if you get a million-dollar loan, you don’t pay 12%–15%, but I can give you an example of where it does work. It was one of our clients from about 10 years ago. Somebody called me up and they were looking for a $250,000 consolidation loan, pay off high debt. The trouble is, he just went through a terrible divorce, lost a lot of his assets, his FICO score was in the 400s, and as you know, even alternative finance lenders, he had a business at revenue but they wouldn’t touch him, either, because he’s proven […] pay anybody with a 400 FICO score.
What happened is I started talking to him, like what kind of business do you have? He said, well I rent luxury rentals—Lamborghinis, Porches, Ferraris, Aston Martins—to people—he was right here in Las Vegas—that want to drive down the strip, drive around Southern Nevada. So hey, are those assets leveraged? He said most of them. Most of my cars are bank-owned, but I do have a couple of Ferraris that I own 100%. I said, let me call my lender.
We were rigged to call him up. We didn’t get him to a full $250,000—I remember we got him like $195,000—but what he did with that is he paid off the high interest line of credit cards and other debt. It drove his FICO score up. Then he was able to get a traditional business loan based on the assets. So it worked out for him.
There is a way to utilize these. Even though it’s high interest, this credit line helps you out. But think about it. Fine art. You have a Babe Ruth baseball card signed, you could use that as collateral. Even a fine wine collection, Toby, which maybe our very own Clint Coons in Washington could use.
Toby: One of my clients can borrow against that.
Dan: It’s a unique lending product. What we do here at the Anderson funding community when we do consultations, is we don’t leave any stone unturned. We look for all possible options for our clients on how they can fund, then we give them the options and let them decide.
Toby: And it’s taking it away from the world of the traditional, what everybody pushed into which is personal credit. Getting a mortgage into my house, it gets reported. I get a credit card, it gets reported. Everything’s about my FICO score. If I use the things that I’ve received, they punish me. It’s this constant game.
You’re just saying, I’m no longer going to play it. I’m going to go over here where they don’t do that. It’s asset-based lenders who are actually looking at the things that I own. Instead of me having to sell things to come up with cash, I may be able to lever the assets I have to continue to acquire additional assets.
It doesn’t mean going to debt up to your eyeballs. It means instead of having to sell something, if you need money to live off of and your stock portfolio has grown 20% the last two years, you can access that growth without actually having to sell the underlying security and incurring a tax consequence.
And that goes for the businesses, that goes for things like collectibles. That even goes for things like cryptos and other assets. At the end of the day, the whole point is that you have options that you may not even be aware of as far as accessing capital, whether it be to send a child to school, whether it’s to pay off a higher interest rate obligation, maybe personal credit cards.
You’re crazy not to go look to see if you have some lower cost cash that’s available to you. Even if you had a business that I get 0%, can pay off something that’s at 11%–12%. That’s a tremendous return right there. Where if you’re talking to Geal and you access a large amount of money, that eliminates all your personal credit cards.
You have a portfolio and you’re one of those people that inadvertently, just because you’ve always been told to do this, you have a few credit cards and you always carry a balance—you got $20,000–$30,000—wipe it out, and then pay that off at the 2% as opposed to whatever the credit card is charging. It just makes too much sense.
I’m always shocked that people, whenever I bring these things up, they tell me they don’t exist. And it’s just because they’ve never heard of it. It is out there and you guys have been awesome sharing your experience.
Anything else that you guys want to leave with? You guys just really opened up some eyes and hopefully some ears. Is there anything else you guys want to bring up that might be valuable to anybody listening?
Dan: For me, Toby, I always instruct my clients to obtain these lines of credit when you can. The best kind of financing is when you don’t really need it. I hate to say that, but because something may happen in the future—you don’t know—and having a line of credit, you have it available, it’s already approved, and you have access to it immediately to take advantage of an opportunity. Or if something terrible happens, you already have it set up.
Toby: What about you, Geal? You’ve been doing this a long time.
Geal: I forgot to mention that on the variable rate line of credit, you can have a checkbook, you can just go online and send money to whoever you need to so that access to your money is even easier. You don’t even have to talk to me.
Toby: You could be living off that line of credit, wouldn’t you say?
Geal: You could. Yes, absolutely.
Toby: Do you have clients doing that?
Geal: Not yet. They have access to it. They just don’t always need the money.
Toby: They don’t have to do it. Well, let’s just be real. If somebody’s dealing and talking to you, they probably have their stuff together. They’re doing all right and they have investments. All of us investors are serial investors. We’re really good about accumulating and we don’t necessarily like leverage. That’s just me. I’m not a big debt person. If I’m going to use it, I’m going to use it to acquire more assets I’m probably not going to live off of.
Geal: That’s the usual phone call—down payments and cash buyouts.
Toby: Yup. I want to get some more access to capital. Anything else, Geal? You live in that really cool world, where you’re probably seeing some complicated transactions. Anything else where you’re just like, wow, people should know about this.
Geal: No. I mean, it’s just very different from a margin loan. A lot of people may be familiar with the margin loan. It’s not the same. We use margin loans to make sure that your checks never bounce. It’s just a little different. You can have both in separate accounts. I would definitely do what Dan said. Get the credit when you don’t need it and just have it there. You never know when your granddaughter or son wants to buy a property, find something they need to have, and you can put in a cash offer.
Toby: Or that opportunity comes down where like, that lot that’s next to your house that you’ve been coveting all these years and all of a sudden goes up for sale. You need a cash offer, you just need to go up there and say I’ll get it. Yes. This is mine. You don’t need to go through and deal with all the headache of a regular mortgage.
I really appreciate you guys coming on. I didn’t make you guys go through all your history. I’ll do that outside of this. I’ll make sure everybody knows exactly who you guys are. I really appreciate you coming and sharing this information. It makes a huge difference. I know that we have a large audience that listens. This is going to actually probably freak some people out. I’ll put both of you guys’ contact information up and we’ll make sure that we drive them to you if there are questions.
Geal: Absolutely. Thank you, Toby.
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