Leveraging equity on my first deal

Accountant · NY · Member since 2025 · 39 posts · 41 votes

1y

Congrats on the progress. That’s a great first deal.

Once the renovation is complete and the house is either rented or ready to list, you can likely do a cash-out refinance based on the $155K appraised value. Let's say a lender gives you 75% loan-to-value, that’s around $116K.

Out of that refi:

You’d pay back your private investor the $52K he put in

Pay off the construction loan (assuming it doesn’t convert to a long-term mortgage)

That might still leave you with a few thousand in cash, depending on final numbers

Even if you don’t walk away with a ton of cash, you’ll have a renovated, cash-flowing property and two vacant lots you fully control. At that point, you’ve proven your ability to manage a deal, which opens the door to new financing options, whether that’s another private lender, a partner for the modular build, or even a small business/construction loan for the next phase.

Bottom line: yes, you can pay your investor back and use this deal to unlock the next one. Just make sure you’re working with a lender who understands your plan and can structure the refinance accordingly.

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AJ ExnerPro Member

Lender · Springfield, MO · Member since 2023 · 652 posts · 314 votes

1y

Hey Blake,

Congrats, that sounds like a great start. Without knowing the specifics of how you guys structured the PML, I would recommend having him put a formal lien on the property for the 52k if they haven't already.

What that does is give you the flexibility that if the appraisal comes in a little lower (not sure if the $155k is the ARV appraisal or the stand-alone now that its finished) that you can set it up as a 'Rate and Term' Refinance and makes sure everyone gets paid off. Always good to pay off debtors first.

If you don't have a lien, and the appraisal comes in lower, then you are capped at 75% rather than 80% on a R&T which might leave your PML a little short

Otherwise, it might just be "cross your fingers and hope for higher appraisal" category. You're looking at 75% cash out on $155k ($116k), which wouldn't leave much after closing for the modular.

Hope that makes sense, good luck!

[email protected]417-427-2612

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Ko KashiwagiPro Member

Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes

1y

Hi Blake,

Are these all modular houses? Typically with investment properties you can pull out up to 75% of the value with a cash out refinances, but most lenders don't touch manufactured/modular/mobile homes so you'd need to connect with the right broker to get the refinance done or a local bank that's willing to do it

310-848-9776

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Blake Petty

OP

Flipper/Rehabber · Hartsville, SC · Member since 2021 · 9 posts · 5 votes

1y

@Ko Kashiwagi

Thanks for the reply, the house in question is a traditional stick built house. But was considering going modular on the vacant lots i own in the same neighborhood.

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Melissa JusticeBusiness Member

Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes

1y

@Blake Petty,

You're doing everything right --bought low, added value, and now you're sitting on solid equity. Once that house is finished and rented, a cash-out refinance or DSCR loan can help you:

Pay back your private investor
Clear your construction loan
Unlock ~$10K+ in capital to put toward your next project

If the numbers pencil out, that next project could be a turnkey rental property in the Midwest or Southeast--think places like Indianapolis, Birmingham, or Memphis, where $25–40K down gets you a renovated, rent ready single-family with property management in place and potential cash flow from day one.

Leverage that equity wisely, and you could go from 1 door to 3+ this year without touching much more of your own cash. You're playing the game the right way. Keep going!

Always here to run numbers or talk about markets!

Best of luck,

Melissa

[email protected]313-221-8718

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Kerlous TadresBusiness Member

Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes

1y

Hey Blake, refinancing the house you've renovated could be your best option. With an appraisal of $155K, you can refinance up to 75% of that value, which gives you around $116K. After paying off the construction loan, you'd have about $56K left, which you can use to repay your investor and put towards the modular house down payment.

From my point of view, if the refinancing doesn't provide enough capital, exploring seller financing or a lease option for the modular house could be a smart move to reduce upfront costs. A HELOC might also be worth considering if you need additional funds.

[email protected]614-490-1163

Kerlous Tadres | Reafco Real Estate540 Reviews

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Jeb Durgin

Lender · South Lake Tahoe, CA · Member since 2019 · 109 posts · 36 votes

1y

Quote from @Blake Petty:

This is my first investment and need help understanding how to leverage my equity for more doors.

Last november (2024) i bought 3 connected properties in a neighborhood going through a renaissance. The purchase price including closing costs was ~$33,000 for all 3 lots together. One has a house (built 1911 870sq/ft) that i have been renovating. Up until now i have been using a private investor’s capital who wanted to see me get started in RE. Currently ive used 52,000 of his money. I am getting a construction loan ($60,000 at 6.5% interest only first 12 months) to finish the rest of the house to get turn key ready. All in all i will have $98-$105k invested in this house (52k from investor and rest from loan). The house has appraised for a finished value of $155k. Is there a way i can pay my private investor back (he only wants what he put in) and still have capital to put a downpayment on a modular house to place on one of the other properties?

Nice work—you're in a solid spot. Once the reno's done, you can do a cash-out refi based on the $155K ARV. At 70–75% LTV, you could pull out around $110K, which should be enough to:

Pay back your investor
Pay off the construction loan
Possibly have $10K–$15K left for a modular home down payment

This is a classic BRRRR move—buy, rehab, refi, repeat.

Just make sure the refi terms work (DSCR loan might be a good fit) and the property cash flows. You're on the right path—keep it going!

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Leveraging equity on my first deal

Leveraging equity on my first deal

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