All Forum Posts by: Matthew Enos

I am a believer in pulling out equity. Pulling out equity does not necessarily mean that you are over leveraged. For example: if you buy a house for 30K, rehab it for 20K and the house is now worth 100K, I would refinance some of the equity out. I do the math two ways to try to find the sweet spot on how much equity I would like to pull. First is to determine the amount of financing that the rent can support. I start with the rent and subtract repairs, property mgmt, taxes, insurances, and how much cash flow I desire. This will leave you with the amount available for Principal and Interest. I then determine how much mortgage that PI can afford.

Second is to determine the maximum amount of mortgage based on value. In this case I know the bank will finance up to 80% LTV

I then use both calculations and go with the lower of the two.

The overall goal is that I have financed all my seed capital back out of the project and I'm still sitting around 70% of ARV.

The other thing to consider is equity is your money and generally speaking return on equity is going down each year (your money isn't working as hard). Refinancing equity out and reinvesting it can increase your ROE.

I don't know around Oklahoma City but in Pittsburgh PA I have done it two ways:

For single family homes or multi families where the utility is split - tenant is responsible.

For multi families where the utilities are not split - landlord is responsible.

For utilities that can be liened against the property (water for example) and the tenant is responsible, I pay the water and then bill tenant. This way I know the bill is being paid and a large lien wouldn't appear.

For multi families where the utilities are not split, the forecast cost of the utility is part of the rent.

All the education is for one reason - to do something with it. I found myself in the beginning feeling "good" because I spent massive amounts of time "learning" but in reality spent little time "doing". You will make mistakes, don't make fatal ones.

You asked what the first step should be and in my opinion that would be "generate leads". There are many different ways to do this and use the education to find one that suits you.

Just to give you a feel for what the others are (i'm a buy an hold)

Step 2 would be to screen leads

Step 3 make offers

Step 4 combine funding with offers

step 5 rehab

step 6 rent

step 7 refinance

step 8 repeat

There are two REIA groups in Pittsburgh. West Penn REIA and ACRE. Both would connect you with a lot of local investors. I know West Penn has a lot of subgroups that would allow for more personalized contact than the larger monthly group meeting.