@Mandi Martinez you want to "cash out refi" from your rental property after the property goes up in value. lets say you buy a $100K home with $25K down. You spend $10k to fix it up to make it nicer and the property value goes up to $120k. Then in a year or two (and hopefully with some nice appreciation as well), you refinance your existing mortgage. Your original mortgage was $75K, which should have reduced a little from your monthly mortgage payments, but now your property is worth $140K lets say. then you can refinance a loan for 75% of your $140K, which is $105K. the bank will give you cash for differential between the new $105K loan and the remaining principal balance of $75K loan, so you get your $25K down payment back basically. Of course it's easier said then done as what property increases 40% in value in one or two years lol that's why it's important to buy at good price (below what it's worth) and force and appreciation (increase value more than money you spent). hope that helps!
@Mandi Martinez it depends right? you are not investing all your $65K into one property. you can probably buy 2~3 properties with that amount of money (unless you want to go into even riskier investments). so think about $600~$900 a month. that's a whooping $6000 CASHFLOW on your $65K investment. that's almost 10% return, which doesn't include property appreciation and repayment of your principal. Note a 2% appreciation on your property is a 8% return on investment to you if you only paid 25% for your down payment.
here's the best part, once you cash refi out, you will get your initial $65K back (hopefully). at that point, you still own the properties that generates $600~900 a month (maybe a little less since your mortgage will be higher now). you get to use that $65k to buy another 3 properties, not to mention you probably saved up some of those cashflows.
investing in rentals is not get rich overnight. if you want quick money, flip is probably better (although there are good and bads - flip is a one time gain where as rentals are more of perpetual income or like an annuity). both requires time and lots of work to make it happen. but that's why we get ahead of everyone else right? because we put the work in that others are unwilling to :)
Hi Mandi I am new to this website, I just got in and see your post. I am also from Tampa bay! I imagine you must be excited about your first investment opportunity. I can send you XL spreadsheet file that will help you understand the expenses and projected profit. I use this file for flipping projects to see the investment potential. It is easy to use, you just change the purchase price and renovation expenses, the rest is going to be calculated by my formula. Did you think of the area where you want to invest?
If you are a Plus or Pro you can go to the tools and use BP Calculators just pick the one you think fits what you are doing. Also you can print it out.
Mandi Martinez You are very welcome Mandi. I would love to connect.
@Mandi Martinez you're welcome that's what BP is for :)
As a lot of people have already suggested about the BRRR and cash-out refi methods of getting your money back and that is a great way to do it. If you have to put 20% down are you buying using a bank? Think more creatively. Have you thought about going to local REIA meetings to network and find properties that you can buy using 5-10K. They are harder to find but but the more you network the more falls into lap. You could buy a property with little down and hold it with private financing "someones IRA" for a few years and once you refi to a long term note you might be able to pull that small investment back out. Even if you can't pull the money back out what is that 5-10K producing on a return. Say you put 10k down on a property and hold the rest on at 8% interest only.
$200 monthly cash flow
=$2,400/yr cash flow profit
10k/$2400 = little over 4yrs .
So you could have your initial capital back in 4 yrs with the rest being infinite returns.
also the saying goes you make your money when you buy is so true