My First Infinite Return!

[Justin B.]

So one of our goals for 2014 was to re-finance the first property we ever purchased. While we had hoped for $10-15k back on that re-finance, it turned out to be $8.2k instead. The appraisal came back lower than we were expecting, but such is the life of SFR investing. Even though we've increased rent $200/month since we purchased in 2010, the appraisal in 2014 was actually 5k LESS than it was in 2010. Yes, we contested it, but it did no good. Again, no one wants to negate an appraisal in the SFR market nowadays. It's a good reason we're venturing into MFR's this year so we have some control over value. But I digress.

In 2010, we put $7k down to purchase this property. We refinanced and just had $8,200 deposited into our bank account. What does this mean? We now have $0 invested in this property. In fact, we were basically paid $1,200 to buy this property (we just had to tie up some money for 4 years). You could even take a step further and say not only were we paid $1,200 to purchase the property, but we were given 15% equity as well (since the re-finance was at 85% LtoV).

This is commonly referred to as "infinite returns". It means the function that calculates cash on cash return now returns an error :). Sure it took 4 years to accomplish this, but it's a huge milestone for us. We now have a property returning a positive cash flow (and a decent one at that) and we have absolutely no money invested in this property anymore. If anyone is looking for a reason to invest in real estate, here it is!