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.
