Posted by Steve H. on March 13, 1999 at 13:55:47:
Yes, you are paying interest on the money. But you should have enough rental income to cover the new mortgage after refinancing. So in the example you take $30K out and refinance but you either rent, sell, or lease option the property. I think the mortgage company would require you to have it leased before they would refinance it.
Regards,
Steve H.
How do you take cash out at close? - Posted by Bruce in Mi.
Posted by Bruce in Mi. on February 20, 1999 at 23:13:32:
I am currently in the Carelton Sheets course and don’t understand how you can tell when you have a potential property that will allow you to do this.Can anyone tell me how you recognize one and how you go about making an offer that allows you to do this? I would appreciate any help I can get. I don’t have any cash for a down payment and am following the course to buy"no money down" and need to develope cash right off the bat.
Thank you
Bruce in Mi.
Re: How do you take cash out at close? - Posted by Aurelia Macklin
Posted by Aurelia Macklin on February 22, 1999 at 11:55:06:
I used this technique at closing once. In your offer to purchase contract, you write a statement that there is a “Seller allowance of X$ for Cosmetic Changes”. Of course the seller has to agree to this cash amount, because they are giving up these funds. Make sure that it says “cosmetic changes” and not repairs. On your closing statement, this allowance will show up as credit to you (the buyer)and offset any money you may owe at closing or give you cash back at closing. Most lenders have a set amount they will allow you to get back at closing. I got back $10,000.
Re: How do you take cash out at close? - Posted by Dax
Posted by Dax on February 22, 1999 at 08:55:50:
I have taken cash out several times and the first step for me is to find undervalued property that I can buy with owner financing, lease with an option to buy, or otherwise tie up for long enough to refinance, usually 6 months or less. This has typically been property owned by a motivated seller…usually properties that needs some repair or that have been vacant for a while.
I just bought a small 2 bedroom house for $18,500 with owner financing from a motivated, out of town owner. It will appraise for $30,000 or so. I will refinance at 80% LTV ($24,000), pay off the $18,500 I owe and pocket the remaining $5500, less closing costs…
So, to answer your question, from my perspective…
I look for undervalued properties.
I make an offer that will take miminal $ from my pocket, yet tie up the property (like to lease with an option to buy, or 100% owner financing, preferably as a balloon note or single pay note.) Then I refinance.
This is not exactly taking money out at close, but you can still take money out pretty rapidly.
Good Luck…
Two ways - Posted by HR
Posted by HR on February 21, 1999 at 09:03:07:
Bruce,
The main method I am familiar with is to refinance the property. Thus, if you can acquire a property no money down, and it has equity of 20% or greater, you can refinance (You can also refi with only 10%, 90%LTV for your personal use and with some lenders for investment. Let’s use 20% to be safe.)
Let’s use easy numbers. Let’s say you acquire a 100k property no money down. The seller owes 40k still. You refinance the property as an investment property with an 80%LTV and you get 40K at closing {80k (80%x100K) - 40k loan balance = 40k left for you}.
Don’t hold your breath trying to find this gem. These refis get slightly easier with rehabs: acquire a after-repaired fmv house of 100k for 40k, put in 10k repairs, then refi and walk with 30k. Of course, your loan must be supported by your cash, rental income, etc.
Hang in there. The learning curve of rei, especially in the very beginning (first year), is very steep. Like climbing Mt. Everest naked and barefoot. Few make it through to the top. Those that do, though, experience a financial epiphany.
Cheers,
HR
Re: How do you take cash out at close? - Posted by Dax
Posted by Dax on March 02, 1999 at 18:50:27:
update…This house appraised for $35,000, so I should be able to take out $9500 less closing costs…
Re: Two ways - Posted by Missy
Posted by Missy on March 13, 1999 at 09:44:09:
First: I’m a very new, not yet a player, but have three properties selected as potential. I am ready to start climing the mountain and reach the top!
Second–THE QUESTION: You received money back at closing or refinancing–Great. Are you not paying interest on this money? Is it not part of the mortage? What idea am I missing? Please, help me understand this principle. I don’t get it, but I know it’s important!