Skip to main content

A Dream Kitchen . . . For An Investor

Any mortgage company that . . . exists won't lend on a house with a kitchen that looks like this, right?  And that's the reason investors who have the cash (or have a connection to someone who does have the deep pockets) are able to come in and snatch up these properties - quite often in good neighborhoods - for REALLY low prices.  Until the new kitchen is installed and the house goes up for sale because it's now "lendable" in the eyes of the mortgage industry, many investors who have limited funds have to wait to recoup their cash to move on to the next project, all the while they're watching other great opportunities being gobbled up by someone else - UNTIL NOW!

If you're a fix-n-flipper, there's a way to get your cash back IMMEDIATELY once the rehab is completed and BEFORE you sell it.  If you're a buy-n-holder, there's a way to get your cash back AND THEN SOME.  Let me show you:

FIX-N-FLIP
  • You buy the house for $85K in cash and put in a basic kitchen for $15K (that’s all that’s needed to make the house “lendable” in this case).
  • Have the house appraised let’s say it comes back at $175K and refinance it based on that new appraised value.
  • You can IMMEDIATELY pull out 75% of the new appraised value or 100% of the cost of the purchase, whichever is lower.  In this case, 75% of $175K is $131,250, so you could pull out $85K, which was the purchase price.
  • Without having to wait until you sell the home, you can turn around, take that $85K you just pulled out, purchase another distressed property, and do it again. 
BUY-N-HOLD
  • Same scenario: You buy the house for $85K in cash and put in a basic kitchen for $15K (that’s all that’s needed to make the house “lendable” in this case).
  • Wait just six months, then have the house appraised let’s say it comes back at $175K and refinance it based on that new appraised value.
  • You can pull out 75% of the new appraised value.  In this case, 75% of $175K is $131,250 and your initial investment was only $100K ($85K for the purchase and $15K for the repairs).  Who DOESN’T like making over $30K in just six months?
  • You now have a property worth $175K that you’ve been renting out and is now paying your mortgage (and then some), a mortgage of only $131,250 on a $175K property, and you have $131,250 to go out and acquire another distressed property. 
Whatever your approach to Real Estate Investing, it's like the directions on the back of a shampoo bottle (slightly modified): purchase, refinance, repeat. 

Comments

Popular posts from this blog

An Age-Old Concept Reaping Future Rewards

W hy are social media like Facebook and Instagram so darn popular among real estate and mortgage folks?   Hint: the top reason might be an endless supply of memes, cat videos, and the chance to be snarky, but the other reason runs a VERY CLOSE second.   Give up?   Answer:   They’re free – and they really help even the playing field by enabling a one-person shop look and market like an organization who employs an army of wordsmiths and graphic artists. This new century is glorious, right?   With that in mind, let me re-introduce you to a centuries-old concept that is equally glorious – and can help IMPROVE the playing field for you, regardless of the size of your team: karma.   On the subject of “free”, I’m not suggesting that you work for free, but when you freely give of yourself and your knowledge, you’ll see a greater payoff, I promise! Recently, an agent came to us with a question: she has a client who is looking to sell his condo.   It...

KNOWING is Half the . . . Problem

If you’ve learned one thing from reading these columns, it’s this: I don’t read a ton of books by or about the French philosopher Descartes or spend large amounts of money traveling the world to view the Masters’ paintings in far-flung museums – my entertainment and sources of knowledge run to the more . . . mundane, if you will.   Well, I’m not about to disappoint.   In the movie Men in Black , the two main characters J & K (played by Will Smith and Tommy Lee Jones, respectively) have recently met and K is trying to recruit J to join the clandestine government agency that monitors aliens on planet Earth.   Agent K has just shown J a lot of things that are hard to believe/explain and urges J to keep them secret.   At this point, J interrupts him, and this piece of dialogue ensues: J: Why the big secret?   People are smart.   They can handle it.   K: A person is smart.   People are dumb, panicky, dangerous animals, and you...

The Power of Doubt

We find ourselves in that weird week between Christmas and New Year’s – that week that feels a bit like the Twilight Zone where no one’s sure what’s real and what isn’t.   Because of that, most people tend to focus on one of two things: eating as much as possible or setting goals for the upcoming year.   The former is squarely focused on the present – how much can I stuff into my gaping maw at this very moment before I pass out and/or puke – while the latter is focused on the future.    Last week, before the Twilight Zone kicked into full gear, I read a short article that resonated with me, and I think it’ll prick up your metaphorical ears, too.   The author of the article is a gentleman who professionally trains Olympic athletes, and he highlights the talents of a particular athlete from the Philippines who is training to be a marathon runner.   He points out that this runner is not a professional athlete, nor does she receive any type of financ...