Gain home equity by using this trick

Written By Diane Robin Johnson, ESQ., J.D.*, CFP®

Beyonce and Jay Z recently acquired this $200 million residence in Malibu, paying entirely in cash. Even for this affluent duo, possessing $200 million in ready cash might be a daunting task. It is speculated that they accumulated the necessary funds through a specific method, which can be emulated on a smaller scale.

Step #1-Take Out an Asset-Based Loan

They reportedly initially took out an Asset-Based Loan, rather than liquidating assets from their portfolio to avoid heavy tax consequences. This loan, backed by their portfolio, was used for the cash purchase of the property.

Step #2-Do a Cash Out Refinance

They then would have the option to do a Cash Out Refinance on the property to establish a conventional mortgage, using the funds from the refinance to clear the asset-based loan.

Even though they would have needed to deal with fees and interest for the asset-based loan and the refinancing, they gained tax advantages by not having to liquidate any securities from their portfolio, thereby avoiding hefty tax payments. In addition, they likely negotiated a discount on the property's price for making an immediate all-cash offer. If they just got a 10% discount, that would mean $20 million saving on the purchase.

This strategy is flexible and can be applied to purchases of various sizes without necessitating income, employment, or good credit standing. The strategy can work for a $200 million dollar purchase or a $200,000 purchase.

Diane Robin Johnson, ESQ., J.D.*, CFP®

Diane is the owner of her own fee-based financial planning firm. Prior to establishing Blackhawk Financial Advisors, Diane served as a Director of Financial Planning for Lincoln Financial Advisors. In that role, she served as “the financial planner to the financial planners” or the brains of the financial planning department. Diane’s knowledge and expertise allowed her to help other planners behind the scenes design sophisticated financial strategies for their clients including retirement planning, investment planning, fee-based financial planning, and insurance strategies.

To date, Diane has drafted over five hundred financial plans for clients.

Before Lincoln Financial Advisors, Diane was a Commercial Investment Banking Associate for the Union Bank of California – she analyzed financial statements of small and large corporations to qualify them for loans up to $50,000,000. Diane has also held the position of Municipal Bonds Investment Analyst at Sutter Securities Incorporated. There, she analyzed all aspects of municipal bond credits to facilitate the underwriting process.

Diane earned her J.D. degree from Hastings College of the Law, her B.S. from San Jose State University, and is a member of the California Bar Association. Having the legal education, the Director-level experience, and the financial background experience truly sets her apart from the rest of the financial planners because she is able to give financial planning advice, tax planning, and estate planning analysis in far greater depth and breadth that a traditional financial planner.

Diane’s home is in San Ramon where she loves playing chess, kickboxing, and Bikram yoga. Diane is a member of Family Bible Fellowship, The California Bar Association, the Contra Costa County Bar Association, and Alpha Kappa Sorority Inc.

*Licensed, but not practicing

https://blackhawkfinancialadvisors.com/
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