Which is a better strategy?
Currently, I have some money to invest in property cash. Here's the deal.
Strategy #1 - I have a bank that is willing to borrow 70% of the appraised value if the property is rented out and if I buy with my own cash first. So for example, I buy a property with my own cash at 50k, put in 5k to rehab and then I call the bank and they appraise it at 100k. They are willing to let me cash out at 70k so they basically give me $15k extra then I started with. With this scenario, I would be able to buy more property this same way and cash flow around $400 including the debt service. The bank told me I could do this as many times as I wanted.
Strategy #2- I have another bank who is willing to borrow money on Rehab deals by financing up to 80%. Basically, I buy a property lets say at 100k and I put down 20% and they finance the rest.
I believe as Will said on his other post that rehabbing would create more money faster, but since I have this type of relationships with the bank, is it still better to rehab? I know how important cash flow can be for banking relationship for future deals (bigger deals) etc. Please advise.
Thank you again,
Greg
Most Popular Reply
Greg, If the scenario is as you state and they will do this over and over, do BOTH! Create cash flow and at the same time, build capital through flips.