All Forum Posts by: Michael B.

Good Morning Everyone,

My daughter is a student-athlete at UAH, she is a Sophomore, and I am considering purchasing a home near the campus and use it as a rental for her and 2 of her roommates. I also would like to eventually purchase a small multi-family, 4 plex, in Huntsville or the surrounding area. Can anyone recommend a local investor friendly bank in the Huntsville Area, to build a relationship?

Thanks

@Michael B did your question get answered?  I know as a new investor, it is difficult to absorb concepts that seasoned investors throw around as common knowledge. 

In Keith's example, he paid all cash, so he had $79K of his own money in ($58K for acquisition and $21K in rehab expenses), so when he goes to refinance for a $77K loan (using your example), he will have only $2K of his own money invested/tied up in the project, thus "Cashing" out of the bulk of his money to get back to do all over again (BRRRR). Had he chosen to refi at 80% LTV, he could've walked away with extra since his new loan would've been $88K. He would have been paid $9K to do the deal. Those are the kind of deals I like! Obviously, I am not including the cost to refi etc, but just using simple numbers, can you see how this 'cash out refi' works?

This doesn't have to be exclusive to cash investors, it can also work for people using hard money funds. Take this example....Purchase price of $128K with a hard money loan of $93K and a rehab budget that was also financed by the hard money lender of $12K. So, $23K investor money, $105K hard money funds. ARV is $165K. Refinanced with a conventional lender at 80% LTV, new loan is $132K, thus "cashing out" the hard money funds and investor's initial investment, as well as giving the investor a $4K surplus to put toward the next deal. Again, this is simple math for explanation purposes. In real life, the investor's $4K walk away money was probably reduced after closing costs and so forth, but you get the idea.

Does that make sense?  Can you see the value in using the tools at your disposal to acquire (like a hard money lender that allows you to finance the rehab), and the value of refinancing the finished project to recoup the initial investment, and sometimes walk away with some of your profit in hand?  It's a great way to make the same money work for you over and over again.