Strategy: Rehab Plus By and Hold

18 Replies

Here is a strategy that I am looking at:

Rehab and resell homes plus by and hold.

50K to invest

Purchase 30K house

Rehab 20K

Sell 100K

Put away taxes and savings off of house one and bank the profit. 

Rinse and Repeat...

Every three to five houses, I will purchase and hold a home with cash (focusing on the 2% rule).

My plan is to do this all with cash.

Is this too idealistic? 

Thanks for the help...

@Donald Spivey  I used to do it this way.  Then I realized I was leaving money on the table to die...my cash, so I modified the idea, but kept the base of the system..."rinse and repeat".

Do it this way:

1 - Buy/rehab all cash
2 - REFINANCE at 75% of the ARV after you season it to satisfy your REFI lender criteria.
3 - Use cash from REFI to do the next house,...and here comes the...
4 - "Rinse and Repeat"

You'll notice it can be done faster this way, but best of all, you never need more than the original cash you used on your first property...since every time you refi, they keep GIVING IT BACK.  Go figure.  No matter how hard you try, they won't let you spend it, and...sometimes, if you do a really good job, you can get more back than you put in (cash out refi).  Best part, they keep giving you more money every month after you refi (cash flow).

@Donald Spivey

That is the same strategy that I have used for years now. 

It definitely works, remember it is a race but it is not a sprint. 

Also, I am not to sure how realistic it is to get 30k plus 20k sale at 100k that is a pretty good deal I am not sure how many you will find like that. None the less it is an approach that will work for sure. 

Andrew

@Joe Villeneuve

Great point, there are always areas that can do different numbers. 

And normally the midwest is a great place for those numbers. 

Andrew

@Andrew Cordle  Yes, there are a number of areas where this number combination will work...mostly in the midwest.  I'm just more familiar with SE Michigan, since it is the view I have when I look out my office window.

@Andrew Cordle  There are places here in Florida that I think will work with that ratio. If nothing else, I will try to operate by the 70% rule. @Joe Villeneuve  I'm not that familiar with the refi process that you are talking about, but I will research it. I'm trying to do everything with cash. I'm not trying to make this a living, just a supplement looking towards future retirement. 

@Donald Spivey  I can explain it to you.  Contact me through messaging or direct email.  It is a perfect system for you if you are working with cash

Good luck finding properties in Florida at 30% ARV! If you do find any, let me know, I'll be the first to buy it from you.

Originally posted by @Joe Villeneuve :

@Donald Spivey  I used to do it this way.  Then I realized I was leaving money on the table to die...my cash, so I modified the idea, but kept the base of the system..."rinse and repeat".

Do it this way:

1 - Buy/rehab all cash
2 - REFINANCE at 75% of the ARV after you season it to satisfy your REFI lender criteria.
3 - Use cash from REFI to do the next house,...and here comes the...
4 - "Rinse and Repeat"

You'll notice it can be done faster this way, but best of all, you never need more than the original cash you used on your first property...since every time you refi, they keep GIVING IT BACK.  Go figure.  No matter how hard you try, they won't let you spend it, and...sometimes, if you do a really good job, you can get more back than you put in (cash out refi).  Best part, they keep giving you more money every month after you refi (cash flow).

 after X amount of properties though you get stuck. also have to show adequate income on tax return and high income to debt ratio. not to mention credit and fico.. and if you went to a private or hard money lender with 6-12 mo term still you are not gonna cut it

@Ricardo S.  Those are the terms you're used to.  Mine are different.  Credit is still a factor, but every cash flowing property you add, also adds to your income, so each subsequent application looks better on your debt to income ratio.

10 properties is the limit my lenders will allow.  After that, you have other options.

@Joe Villeneuve I wonder if you could expand a little on your strategy for me? I'm interested in doing the same. I have 3 properties now with loans on them. It's my understanding that after 4 you can't do a cash out refi, is that not correct?

What are your options after 10?

@Drew Vukov Maybe. It all depends on the lender. If you go to a bank, it can vary from 3-5 loans in any one persons name. This includes your own residence. So, if you have a mortgage, and a second mortgage, and a LOC on your own home...that's 3.

If you go outside of the banking system, like a private brokerage, or private lender, they do their own underwriting, and usually keep the loans in house, so they set their limit.  That limit can still be 5, but it is usually higher.  Mine just happens to be 10.

Joe, I'm really going to have to look you up sometime and make the drive across Michigan to talk with you.  While I think there are plenty of opportunities to invest here in GR, Detroit is always looming ;)

I'm just amazed people are still so locked in to Freddie/Fannie requirements.  People, get off your butts and start making some phone calls.  Find a few neighborhood credit unions and see who does portfolio lending.  Those banks make their own rules.  Drives me nuts when people hear the first no and think that's the standard for EVERYONE.  You're likely to hear 9 no's for every yes... get used to it in this business!  The key is for YOU to do some work to get the deals you want.

It's been said so many times and yet still bears truth... if this were easy, EVERYONE would be doing it.

If you want to break the mold and achieve above average returns, it requires you to invest the time, to learn the secrets, to have the knowledge to achieve that.  It's not going to just drop in your lap because you have good intentions.

Originally posted by @Drew Vukov :

Joe Villeneuve I wonder if you could expand a little on your strategy for me? I'm interested in doing the same. I have 3 properties now with loans on them. It's my understanding that after 4 you can't do a cash out refi, is that not correct?

What are your options after 10?

 After 10?...punt.

Sorry, couldn't resist.  Getting ready to watch the football game.  On a serious note, get a partner that can get more mortgages....and share the wealth.

@Nathan Emmert  Always love meeting new investors.  Anytime.  Don't need to drive, I do video C.C. all the time with out of state (or outstate) investors. 

Originally posted by @Nathan Emmert :

Joe, I'm really going to have to look you up sometime and make the drive across Michigan to talk with you.  While I think there are plenty of opportunities to invest here in GR, Detroit is always looming ;)

I'm just amazed people are still so locked in to Freddie/Fannie requirements.  People, get off your butts and start making some phone calls.  Find a few neighborhood credit unions and see who does portfolio lending.  Those banks make their own rules.  Drives me nuts when people hear the first no and think that's the standard for EVERYONE.  You're likely to hear 9 no's for every yes... get used to it in this business!  The key is for YOU to do some work to get the deals you want.

It's been said so many times and yet still bears truth... if this were easy, EVERYONE would be doing it.

If you want to break the mold and achieve above average returns, it requires you to invest the time, to learn the secrets, to have the knowledge to achieve that.  It's not going to just drop in your lap because you have good intentions.

 Nathan,  is there any portfolio lenders or private investor you might know and recommend willing to fund deals in the Carolinas? I can bring countless deals to buy and hold. Most properties are priced way below Nation average and pay themselves off in 3 yrs. 

@Ricardo S.  

Portfolio lenders tend to be smaller banks/credit unions... most only invest locally.  I know portfolio lenders in Ogden, UT and in Grand Rapids, MI... I've never invested in the Carolinas to look down there but a Google search and a lot of phone calls should give you all the info you need.

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