All Forum Posts by: Andrea Hewitt

Thank you for the explaination, but it still leaves me puzzled. Let me try to explain my confusion further.

If I want to purchase an undervalued property for $100,000. The banks will require that I put down no less than $20,000 cash. They want investors to have a larger amount of cash invested in the property because it decreases the banks risk. The more money I have in a property, the less likely I am to ruin the investment.

Now, I go to do a cash out refinance when the property has a net worth $130,000 (from fix ups or whatever). The bank will now give me a mortgage for 80% of the value or $104,000. I pay off the first $80,000 mortgage and get back $24,000. I now have back my initial cash investment of $20,000 plus a little extra. This is great for me.
But how does the bank not see this as a riskly loan since I no longer have any cash invested in the property?

If the banks are willing to let investors refinance properties to pull out all of their money, why are they so strick about putting down no less than 20% for the intital purchase?

I have a question about cash-out refinancing that I am hoping someone can answer for me. It takes a bit of explanation so please be patient with me.

When applying for a mortgage to purchase the property, the lenders want the investors to put down at least 20% so that the investor is more vested in the property and therefore less risky. This makes sense.

However, when doing a cash out refinance, the amount that the bank bases the new loan on is the current value of the house. Since this is more than the purchase price, (due to market forces, or property improvements) it allows the investors to pull out their initial 20% cash investment.

My question is, why does the lender in the cash out refinance not see that as a risky loan? How much the investor initially paid for the property, and how much cash they invested is not a secret. Why does that second mortgage lender not care if the investor is no longer personally vested with cash in the property?

Thank you!

I want to be a full time real estate investor.
I currently work in an entirely unrelated field of textiles. We produce and sell lace, for intimate apparel, all over the world. I do not get to travel all over the world, I just get to sit behind a desk. I want to get out of it entirely.
On the other hand, my husband is a web site designer. He is starting up his own business. So, we are hoping that out real estate investments will give us a little bit of a financial cushion as he starts.
Eventually I want the real estate investments to support both of us and our future family without having any other jobs or businesses.

You should line up the property manager once you are under contract for the property and you know the closing date.
When you are calculating the financials for any property that you are looking at, assume that the property management will cost 8-10% of the gross rents. They will also charge you extra to fill any vacancies. In my research I have seen this fee be anywhere from 50-100% of one months rent on an apartment to a flat fee of $300-$500 dollars. This will probably vary depending on the east of rentals in the area and the amt of rent the unit brings in.
If you are looking in one particular area, just contact several property managers and ask for their rates. That will help you more accurately calculate the numbers for potential properties.

I used to think that real estate investing was something only wealthy people could afford to so. The rest of us struggles to afford a second "vacation" home and called it a real estate investment. When I met my husband he had done a lot of reading from various "gurus: and showed me some real life ways that non-wealthy people can still invest in real estate.

I was so attracted to it because I am one of those people who never had a career, but just a job. I have no calling. I have had jobs in several fields and not really liked any of them because I simply do not like working for other people. What I really want to be is a philanthropist. I know it sounds funny, but I want to help people, a lot of people, and on a large scale. What people like Bill Gates George Soros and Warren Buffet have been able to do, just amazes me.

I have found real estate investing to be a very viable means to an end.

There are plenty of real estate role models to choose from. But I get inspiration from the people posting on these forms. The people who are at the same level that I am at and are trying to do the same things that I am doing are my inspiration.

Thank you very much for your kind and encouraging words.
I have been working very hard on my blog. It is nice to hear that people are getting something useful from it. After all what good does it do to have knowledge if you can not give something back to others.

Thank you again!!

Yes, I plan on staying in NJ and investing all over the country, not just TX.

The investors club that I went to was:
http://www.njreclub.com/

It seems to me that investing out of state is done quite often, but you need to give up some comfort and control to do it. You have to be trusting of the team of people that you use in each area, and be willing and able to change people that are not working out if needed. We have been lucky so far. We have an excellent realtor.

I also feel that investing out of state will let me run our investments more easily and free up my time for other money-making ventures. I fear that if a property is too easy for me to get to, I will be tempted to run over every time there is a problem. I do not want to get tied down in the minutia of managing the property. That is what I hire the property managers for.

I am a Novice investor from New Jersey. I just started up this past year so I so not have much in the way of real life experience to share with you. I actually am not even looking to invest in New Jersey. The housing prices are so out of control here that I could not afford to purchase anything here. I have been looking to buy in Texas.
However I attended my first investors meeting last week and heard that the investors who buy pre-foreclosure and foreclosures are making a killing in NJ because people overextended themselves too much because the interest rates were low. Now they can't keep up with the payments are are losing their houses. So, the investors are swooping in and making a lot of money.

I prefer to buy and hold method of making money. At least for now.

My plans for 2007 include closing on my first investment property.
I have yet to figure out all of the details, but I want to keep the ball rolling on investments so that I have enough money by the end of 2008 to quit my job and be a stay at home mom. (Another goal for 2007 is to have my first baby.)
I am using the buy and hold strategy of investing, so cash flow has been my main concern. But I am also looking into investing in paper.