Why Real Estate Investors Love Velocity Banking
Most real estate investors are taught to "leverage" - use as much debt as possible to acquire more properties. While this builds a portfolio, it also builds a mountain of mortgage payments that eat into cash flow for 30 years per property.
Velocity banking flips this model. Instead of accepting 30-year mortgages as inevitable, savvy investors use the velocity banking strategy to pay off each rental in 5-7 years. The result? True passive income from properties you own free and clear.
Example: A rental with a $1,200 mortgage payment generating $1,800/month in rent only cash flows $600. Pay off that mortgage with velocity banking, and your cash flow jumps to $1,500+/month from that single property.
How Velocity Banking Works for Rental Properties
Secure a Line of Credit
Use a HELOC on your primary residence (easier approval, better rates) or investment property HELOC if you have 25%+ equity. Some investors use a PLOC as a supplementary tool.
Make a Chunk Payment to Rental Mortgage
Transfer $5,000-$20,000 (your chunk amount) from the HELOC directly to your rental property's mortgage principal. This immediately reduces the balance and future interest charges.
Route Cash Flow Through HELOC
Deposit rental income AND your personal income into the HELOC. Pay expenses from it. The combined positive cash flow rapidly pays down the HELOC balance.
Repeat the Cycle
Once the HELOC is paid down, make another chunk payment to the rental mortgage. Each cycle accelerates payoff. Target: pay off one rental property every 2-3 years.
Real-World Example: $150,000 Rental Property
Traditional 30-Year Mortgage
- Loan: $120,000 at 7.5%
- Monthly Payment: $839
- Total Interest Paid: $182,000
- Total Cost: $302,000
- Time to Payoff: 30 years
- Monthly Cash Flow: $361
With Velocity Banking
- Same Loan: $120,000
- HELOC: $20K chunks at 8.5%
- Total Interest Paid: $38,000
- Total Cost: $158,000
- Time to Payoff: 6.5 years
- Cash Flow After: $1,100+/mo
Savings: $144,000 in interest + 23.5 years of time + $739/month more cash flow
Velocity Banking Strategies by Investor Type
Buy-and-Hold Investors
Focus on paying off one property at a time. Each paid-off rental adds $800-$1,500+/month to your cash flow, which funds faster payoff of the next.
Target: Own 5-10 free-and-clear rentals in 15-20 years instead of carrying mortgages for 30 years each.
BRRRR Investors
Combine velocity banking with BRRRR (Buy, Rehab, Rent, Refinance, Repeat). After the refinance, immediately start velocity banking the new mortgage while searching for the next deal.
Target: Create a rotation where you're acquiring AND paying off properties simultaneously.
House Hackers
If you house hack a duplex/triplex, your rental income from other units dramatically accelerates velocity banking. Combined with low owner-occupied rates, you can pay off your first property in 4-6 years.
Target: Pay off house hack, move out, repeat with next property for rapid portfolio building.
Getting a HELOC for Investment Properties
While primary residence HELOCs are easiest, you CAN get HELOCs on rental properties. Here's what you need to know:
Requirements
- 25-30% equity minimum (vs 15-20% for primary)
- Credit score 680-720+ (higher than primary)
- Documented rental income (lease agreements)
- DTI ratio typically under 43-50%
Where to Look
- Local credit unions (often most flexible)
- Regional banks (TD Bank, Regions, etc.)
- Figure, Spring EQ (online lenders)
- Portfolio lenders specializing in investors
Pro Tip: If you can't get a HELOC on your rental, use a HELOC on your primary residence instead. The money is fungible - it doesn't matter where the HELOC originates, just that you use it strategically.
Common Questions from Real Estate Investors
Should I pay off rentals or buy more properties?
Both - strategically. Velocity banking accelerates payoff so you can buy more, faster. A paid-off rental generating $1,200/month cash flow funds your next down payment in 2-3 years. Traditional leverage takes 30 years to free up that capital.
What about tax deductions from mortgage interest?
You're not paying interest to get a deduction - you're getting a partial rebate on money you're losing. Saving $100,000 in interest to lose a $25,000 tax deduction is still a $75,000 win. Plus, paid-off properties have other tax strategies (depreciation still applies).
Which property should I pay off first?
Usually the one with the highest interest rate or smallest balance. Highest rate saves the most money; smallest balance gives you the psychological win and cash flow boost fastest. Run both scenarios in our calculator.
What if my rental has a vacancy?
Velocity banking still works with your personal income. Vacancies slow the cycle but don't stop it. The key is positive cash flow overall - even if one rental is vacant, your other income sources continue the paydown.
Calculate Your Rental Property Payoff
See exactly how fast you could pay off your rental properties and how much interest you'll save with velocity banking.
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