The Power of the Cash Our Refinance

[Stewart Beal]

Big Win Yesterday! The Power of the Cash Out Refinance. In 2005 I became friends with a fellow real estate investor in Ypsilanti, MI, I had purchased 4 properties to date, and was watching this friend closely. It was cool to see him purchase the Lakepointe Center, a 24 office suite, 11,000sf complex, near my house for $746,000. I thought wow, if I keep working hard and investing in real estate I can purchase something like that one day. Fast forward to 2016 and I am driving by the building and was astonished to see a for sale sign in front of the building. I immediately pulled over and walked the exterior of the building. It was clear the building had been let go and there were not many tenants. I called the broker who had the listing and was absolutely flabbergasted to be told the building was for sale for $325,000! I said to the broker, what happened? He said that there were only 4 tenants and my friend had given the bank the building back through a deed in lieu of foreclosure and that he had been managing the building for the bank, had failed to attract any tenants for months and the bank told him to dump it. At the time my partners and I had purchased another nearby office building so I called them, told them based on my analysis this building could be worth $1,300,000 some day, and so we made a full price offer at $325,000 which was accepted the same day by the bank. We closed quickly and we went to work leasing up the spaces. Using a sign out front, basic loopnet/craigslist/FB marketing we had all 24 spaces leased within 9 months as small affordable office spaces are always in pretty high demand. In 2018 we did a small cash out refinance raising the debt on the building to $400,000. In March and April 2020 we lost a few tenants when Michigan shut down, but when Michigan opened back up we quickly refilled them and the building is 100% occupied today. Yesterday we received a term sheet from a local credit union offering a $1,000,000 loan, 10 year fixed, 3.9% interest, on a valuation of $1,300,000 for a $600,000 cash out refinance. Pretty good for 4 years work.

Please Note: I have partners in this deal that contributed to its success.