Investment Strategy

[yellowclaw]

Help and advice needed for an investment strategy.

I recently purchased an 1100sqft home to rehab then rent it or flip it. This is my first rehab home and I have lots to understand about rehab, rent and finance. My goals would be to own a few of these homes as rental properties.

I purchased the home for 90K using money from private investors. The terms and interest rates are flexible and will be determined by me when the money is available. I’m not comfortable holding the money long term and would like to pay the loan and interest off as soon as possible.

Let’s say the ARV of the home is 150K and rehab will cost around 7K. Can I get an equity loan on the home to pay off the 90K loan and have extra for a down payment on another rehab home? Considering that I plan to rent it out, will this effect the loan amount or the ability of me getting the loan?

I have more questions and hope that with everyone here helping me, we can come up with a strategy that will allow me to sleep at night.

Thank you in advance everyone.

[Dan Auito]

Help and advice needed for an investment strategy.

I recently purchased an 1100sqft home to rehab then rent it or flip it. This is my first rehab home and I have lots to understand about rehab, rent and finance. My goals would be to own a few of these homes as rental properties.

I purchased the home for 90K using money from private investors. The terms and interest rates are flexible and will be determined by me when the money is available. I’m not comfortable holding the money long term and would like to pay the loan and interest off as soon as possible.

Let’s say the ARV of the home is 150K and rehab will cost around 7K. Can I get an equity loan on the home to pay off the 90K loan and have extra for a down payment on another rehab home? Considering that I plan to rent it out, will this effect the loan amount or the ability of me getting the loan?

I have more questions and hope that with everyone here helping me, we can come up with a strategy that will allow me to sleep at night.

Thank you in advance everyone.

Hey Ole Yeller haven't seen you around much, glad to see your here. You can absolutely do this, I guess you haven't read my book yet, I really focus on the methods you need to use to do this, I don't tout my own wares much but I guarantee this book can help you tremendously here to completely understand what you need to do.

Regardless of that, once your finished I would have it reappraised by an appraiser who also has lender contacts that accept his/her appraisals, to begin to establish rent on $150,000 you can start with the initial baseline of 1% of value that would be $1500.00 a month now you can look at other rentals similar to yours in the classifieds and call realtors asking if they have any rentals available like yours and find out what they charge in rent, if they even have anything available, if they don't then demand could be high for yours!

Take about 4 similar rentals to yours and add up the total of the four rent prices of your comparables and divide by 4 then you'll have the actual average rent for your area, set your price $10 below that average and on average you will have the lowest rent, this gets people calling you first and then you can screen for the best tenants from the availability pool, this is a science and my book details it to a tee.

Lenders don't have a problem loaning on good rentals with a one year lease in place they factor 75% of the rental income as the mortgage offset, in this case 75% of $150,000 is $1125.00 and a mortgage on $150,000 at 7% (30 yr fixed Investor rate) equals $635.51 priniciple and interest only. You could factor $12 per $1000 for taxes = 150 x $12= $1800 divided by 12 months is $150.00 for taxes a month and $5 per $1000 for insurance=$750 divided by 12 months =$62.50
$635.51 Principle and interest
$150.00 Taxes
$62.50 Insurance
----------------
$848.01 escrowed mort payment(way below the lenders $1125.00 guideline)

Say you owed $100,000 and you acquired the whole 100% value equity line, this gives you $50,000 left to go invest into other highly leveraged properties, you could do quite a few deals when creatively using $50,000 in cold hard cash.

The book lays it all out in plain english, I hope you get it!

Hope I answered your question.

[yellowclaw]

Thank you for your advice. I’ve read your attached files before and appreciate reading it again. Help when needed tends to stick more then when you are not ready. I mean, I’ve read it before but it didn’t mean much to me at the time. But now that I’ve taken the next step, this is perfect reading for me. I will run to Boarders at lunch today and check out your book. I’m always lurking around at MagicBullets.com. I may not post, but I do lots of reading. Thanks again for all your help. This forum is wonderful.

[Dan Auito]

Yellowclaw, competition is fierce for shelf space, do me the the greatest favor you can and ask them to order it. Barnes & Noble has been slow but said they will be stocking it as well! :praise: