Question on Equity

[Eric Mass]

So I've been pondering on a certain topic and want to make sure I understand it in its entirety. Let's say for instance, I come across a property for say $15,000. It needs another $10-15k in rehabbing. Once completed, the ARV is 65k. If I'm able to pay those cost (the property, closing cost, rehab, etc.) in cash in the beginning, how am I able to get the equity out of the house from the ARV if there is no mortgage? Or should I not pay those cost off in cash? Thank you in advance and much love.

[Joe Villeneuve]

If you paid cash for everything, as far as the bank is concerned, you have 100% equity...no liens on the property.  You're in a great position.  This has a huge advantage to you since you can refinance (after the lender's required seasoning period) and reuse the cash on the next house...while your tenant (you're now holding the first house) is paying for your refi loan.

Here's how this would work if this was my property, in my area:

1 - I (You) paid $30k in cash, and the house is worth $65k (ARV)
2 - My lender will give me 75% of the ARV when I refi, so I get $47k in a loan.

      Yes, I get back more than I put in.  Like I said, you're "You're in a great position"

3 - My tenant pays off the mortgage on the first house, and I use the refi cash to buy a 2nd.

                                      Here is where the real fun begins

4 - I keep doing this until my lender won't let me have any more mortgages (10 in my case).

                                                      It gets better.

5 - I don't have to stop when I reach my 10, I just get a partner with credit, and add 10 more...or as many as that partner has left.

                            Thought that was good?  How about this?

6 - When you decide to stop, and you refi your last deal, you get your "cash" (this is the original cash being used over and over again)....back.  You never actually spent it.

Joe Villeneuve