After a recent discussion with my parents, they have agreed to let me leverage their $150,000 home equity line of credit at a 2.65% annual interest rate under the condition that I take full responsibility for it.
We have all agreed that the 150k sitting in their credit can be put to better use considering how it has never been touched.
Although my parent’s are more traditional in their thinking of money, they trust that I can make good financial decisions.
Especially since they are getting older and still working in factories, I would like to make good use of this credit to hopefully retiring them. A portion of what I do with this credit will definitely goes toward their retirement. I consider this agreement to be a win/win situation.
Learning to Manage the Responsibility
However, with barely no experience in dealing with 6 digit figures and the house on the line, the responsibility on my shoulder is very heavy. I cannot rush myself into making any random investment without sitting down to plan and think it through thoroughly.
There are lots of things to consider to ensure that what I do with the line of credit benefits everyone and not just myself. I must also have contingency plans in place should something go wrong. This is definitely an opportunity for me to practice my win/win skills.
The safest play for investing this $150,000 would obviously be to use as little as possible.
One possible investment would be to use a portion of it as a down-payment to a property where I can attempt to rent it out for positive cash flow. This will give me the opportunity to dip my feet into the real estate game. Plus, if anything goes wrong I would have only used a quarter to a third of the credit which I can simply repay through my savings.
If this turns out to be profitable, I can use the line of credit that I get from that new property to purchase another property or to dip further into the $150k for a second down-payment and so on.
The second option I am considering is to purchase a fast food franchise. This is obviously a riskier move but the pay off may be bigger.
One Step at A Time
Regardless of how I leverage this credit, I will not rush into anything and will spend a lot of time considering every angle before doing anything major. Perhaps I may not even use this.
I do not know when I will be confident enough to make any decision but I do know that in order to proceed, I will need to do a lot of research to increase my knowledge in either option I’ve listed.
Despite all of this, I do know that leverage is the key to building wealth. For me to reach my financial goals, I will need to learn how to use this to our advantage.
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