My Strategy... Thoughts or Advice?

9 Replies

I just closed on a cash out refi, using the equity in my first rental property (no debt attached to this parcel).

And now as a result, I've got two more properties under contract and should be closing on them with in the next two weeks!

I purchased my first property in May of 2013 for $8,750 with all cash (had a total of $12,000 cash invested in this property) and took out a Prosper Loan ($10,000) to fix up the property doing all of the work myself. I have a very high APR on the Prosper Loan and currently working on paying it off. This property rents out currently for $500 a month.

I just closed out a cash out refi on the property, which appraised for $45,000, and got 75% of that value ($33,750).

Using those funds we locked up two more properties. A REO that was listed for $9,900 (ended up going $11,000) due to multiple offer situation. This property has a ARV of approximately $60,000 to $65,000 and will rent for $650 to $700 a month. This property needs about $7,500 in materials and about 3 months of work (which I will be doing my self again).

The second property is actually from a relative that found out that I buy real estate properties. He wanted $30,000 for his 2nd house, which has a ARV of around $60,000 to $70,000 and needs about $4,000 in materials and will take about 2 months to renovate. Well, after seeing the property, (it was in worse condition then I had thought) and ending up offering $10,000 down with $5,000 to be paid over a year (land contract) interest free. This property will rent for $600 to $650. The reason I didn't just give the full $15,000 is because I'm trying to pay for all of the renovations in cash, and not secure any more debt and I can't give the full $15,000 right now without running short on cash.

After the renovations are done, I will have one mortgage (cash out refi) for $33,750, and three properties valued at approximately $160,000 to $170,000, giving me about $130,000 equity and monthly income of $1,800. (I won't go into details about expenses, but I will be profiting about $900 a month.

I am debating on paying off the mortgage before using those three properties in a blanket loan or another cash out refi, or just wait about 6 months, and use the equity in the two "free and clear" properties to purchase another 2 to 4 properties.

Thoughts or advice? My plan is to keep growing my portfolio via equity by buying properties that will provide equity.

Keep refinancing.  I'm surprised you had to ask.

Originally posted by @Joe Villeneuve :

Keep refinancing.  I'm surprised you had to ask.

 Honestly, my plan seems so simple, I just wanted to see if others saw what I see or have different ideas that may generate more results based on my equity position.

Thanks Joe!

This was always my plan, but honestly, the entire thing became really, really clear to me as soon as I started closing on my refi.

I asked myself, what's to stop me from doing this again, and again, and again, and again... The possibilities opened up to me. And to think, all I will have personally invested is $12,000.

On the first property, purchase price, plus closing cost and a few other things related to the first property.

Did you get that back when you refinanced?

No, I reinvested it back into the business.

As I add up your numbers, it say you got it back.  What you did with it after has no impact on whether you got it back or not.

$12,000    Total cash in

($10,000)  Prosper Loan

$22,000   Total Cost 

$33,750  REFI

You got more out in REFI than cash you put in...therefor, you got it out when you refinanced.

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