HELOCs as an Asset Protection Device
On my previous blog entry about HELOCs I forgot to mention a pretty important point.
You use a HELOC as an Asset Protection Strategy. Suppose someone decides they want to sue you. The first thing that happens when they go to a lawyer is the lawyer runs an asset check against you. He finds you own several properties. If you have 20% equity on each property, the lawyer is much more likely to take on the case for free without a retainer. However, if you’ve mortgaged them to the hilt, he’s going to ask for a big retainer and the likelyhood of a frivilous lawsuit drops dramatically.
Thats where a HELOC comes in. If you’ve put 20% down on a property, you atleast want to put a HELOC on it so that it APPEARS as if you have a 2nd loan. You may not have drawn a penny out of it but on paper it looks as if you’ve taken that money out.
Besides, if you do get sued, you can use the HELOC to pay for your attorney’s fees!
If you found this post helpful, consider donating to my coffee fund!![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
- Private Money Lending I had lent out some money to a developer at 24% [2% per month] over the year and a half. Every month around the 7th I'd get my 2% like clockwork. Easiest money I never had to work for! The money was secured by a trust deed on the property.Sadly......
- Myths of Hedge Funds WSJ has a great article about Myths of Hedge Funds.Myth #1: Hedge Funds are all the same. There are up to 25 different hedge-fund strategies which include funds invested in equity (both long and short), bankruptcies, mergers and acquisitions, high yield debt, bank debt, currencies, commodities, convertible debt, mortgage backed......
- Is The Economy Recovering? Had dinner last night with an old family friend at a fancy restaurant. One of the topics that came up for discussion was the stock market and whether the recent rally was sustainable. While I didn't have any concrete information about the numbers, I felt that the rally in the......
Related Websites
- Real Estate Secrets - Making Money With Multi-Family Homes Their media graffiti is everywhere; real estate gurus who want to take your money in order to teach you methods of buying and selling real estate that are supposedly going to help you to make a six figure income every year but in reality are going to result in you......
- Investing in Renters Insurance Some people are under the impression that only home owners need insurance on their home. This is completely untrue. It is very important for renters to invest in renterâs insurance in order to protect their property and valuables. There are a few different things that are covered under renterâs insurance.......
- Alternative Income Streams Progress - August 2007 With the beginning of the month comes my alternative income update. This month, the magic word is "perspective." Last night, my wife's car got broken into. Our Magellan GPS was stolen - a loss of about $400. There was $300 worth of damage. Her "emergency" $20 bill was stolen as......
[All content is copyright of Living Off Dividends & Passive Income]
December 15th, 2005 at 2:27 pm
Creative way to look at it
February 17th, 2006 at 6:42 am
In most states there are Homestead protection acts that protect your primary residence up to a limit (ussually $500,000 of equity).
In those cases HELOC are not such a good idea for assett protection.
Also, if you get money out of a HELOC and invest elsewhere, money outside of the primary residence IS NOT PROTECTED by Homestead Protection Acts.
money And Investing
February 17th, 2006 at 10:26 am
Florida and maybe Texas have unlimited Homestead protection. California only has 150k.
As far as I know most states do NOT have unlimited protection. besides, you can put a heloc on it and not withdraw any cash out of it. the idea is to appear fully leveraged. if you have 500k in equity in your home, a lawyer doing an asset search on you probably knows you’re wealthy.
May 8th, 2007 at 10:27 am
That’s creative…if I ever live in a non-Homestead protected state I will give it some thought. I have a home equity loan out on my house with very little on it as a second safety net behind an emergency savings account.