Should You Do a Cash-Out Refinance To Buy Investment Property?

Many people hear about cash out refinances that are the main residence of the borrow, and I do know many people who buy San Antonio investment properties and Austin investment properties who pull money out of their home to buy more buy and hold properties.

After all, if you are able to borrow money on your personal residence at a 3% interest rate and are confidant you can invest that money in San Antonio real estate and make 10% reliably, why wouldn’t you do it?

But another cash out refinance to consider is in your investment properties. A few years ago, these types of loans were hard to find after the crash, but now there are many mortgage lenders that offer buy and hold investment property owners the chance to use equity in their investment properties.

Many real estate investors are able to drop their interest rate when they do a cash out, which improves their cash flow too.

If you are thinking about doing a cash out refinance on investment properties to buy more, please keep these thoughts in mind:

Do You Have Equity? 

The more equity in your property, the better position you have when you get a new loan. Most lenders for Austin investment properties, San Antonio investment properties will loan up to 75% of the home’s appraised value. This is the maximum that has been set by Fannie Mae.

So before you opt for an investment property cash out refinance, you have to have good equity in the home. I think the best candidates for this rental property strategy are houses with 30-40% equity in them.

Non-Owner Occupied Cash Out Refi 2016 Rules

  • Maximum LTV is 75% for a one unit property and 70% for a 2-4 unit property.
  • If your buy and hold investment property was listed to sell in the last 1/2 year, the max LTV is 70%.
  • You also cannot do a cash out refinance on an investment property bought in the last 180 days.

Note: Cash out refinance loans on investment properties are riskier for lenders, as you are not living in the house. Expect tougher qualifications and a lot more paperwork than for your own home’s cash out refi.

Expect to need excellent credit scores and six months of cash to handle all of your mortgages.

Some lenders will not allow you to do this if you already have over four financed investment properties.

Is Cash Out Refi the Right Move for You? 

If you have equity, meet all requirements of the lender, and you think a lower interest rate will help, also keep these factors in mind:

  • Look at how much your monthly payment will go up. Can your rental income handle it, when you consider repairs and vacancies?
  • Think about if you are going to buy more rental properties. Taking on more debt could affect if you will be able to get another loan.
  • Do the terms of the refi loan make sense for your goals? Different lenders have all kinds of different terms for refinances for under market value investment properties. If you have an ARM, you want to be sure you can handle change in payment.

 

 

SOLD – 820 South San Manuel St., San Antonio TX 78237

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    • Address: 820 South San Manuel St., San Antonio TX
    • Year Built: 1950
    • Description: Under market value investment property, three bedroom, one bath that has 928 square feet. Beautiful home with TWO exterior storage units – this is a MAJOR selling point for the end buyer; most buyers are blue collar contractors, and they need their tools to be completely secure.
    • Max After Repair Value: $99,000.
    • Cash Price: $65,000.
    • Exit Strategy: Owner finance this out of state investment property with positive cash flow with only $10,000 in repairs completed in 30 days – $99,000, $900 per month, $5000 down, 30 year note, 10% interest. This San Antonio investment property offers passive cash flow with no maintenance.
    • Alternative Exit Strategy: Buy at $65,000, remodel $15,000, rent $995 per month.
    • Contact us for more information or to make offer.
    • Sold and Rental Comps: Sold Comps 820 S San Manuel Rental Comps 820 S San Manuel

More Images (more photos to be added soon):

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Please contact us to make offer or ask questions.

Investors, you will never see a San Francisco investment property, Los Angeles investment property or a Seattle investment property at this price point and rate of return!

Cash Is King in Under Market Value Real Estate Investments!

Many investors wax poetic about the magic of leverage in real estate investing. That is, they say that by taking out a mortgage on an investment property and using a 10-20% down payment, you can buy more under market value properties and generate more cash flow.

I respect their position, but I disagree. And so does my dog and mascot, Teddy:

cash is king

I financially retired at the young age of 28 by buying all cash investment property in San Antonio TX, one of the best cities to invest in real estate. I also came from a poor family and had $40,000 in college debt. Nonetheless, every one of my under market value investment properties has been paid for all cash. These are some of the best San Antonio real estate investments. Buying here in Texas is often better than say, California investment property, because you can buy so many houses with not much cash.

Why Do I Buy All Cash Investment Property?

I prefer incurring the lower risk that comes with buying properties all cash. My under market value investment property portfolio is:

  • Stable
  • Flexible
  • Can be sold quickly when and if I need to

By investing in all cash real estate properties, I have invested my money into a tangible asset that will usually produce cash flow, and may appreciate somewhat over time (this is not my priority – cash flow is).

buy-house-all-cash
All cash real estate sales have dropped but still are 30% of the market.

I also buy cash real estate San Antonio because I always owner finance my under market value investment properties. Many real estate investors take out mortgages and rent their properties. That isn’t my model. I buy all cash real estate and then owner finance at 10%. I get superior cash flow over 10% per year and also have no landlording costs with San Antonio investment property.

When I Buy All Cash San Antonio Investment Properties

I typically pay $40,000 for the under market value property, and about $25,000 for the rehab. So I am in the deal for $65,000 and then owner finance it for fair market value – approximately $90,000. That property owned all in cash generates $800+ per month of positive cash flow.

If I had a mortgage on the house and rented it, I would have only $300 to $400 per month in cash flow, and also would have repairs.

For me, I buy only for long term, maximum cash flow when I buy property all cash in the best San Antonio real estate investments, one of the best cities to invest in real estate, IMHO. It’s a good city to own an out of state investment property because houses are cheap, there are lots of qualified buyers, and cash flow is excellent especially with owner financing.

More Considerations When You Do All Cash Investment Property

  • I don’t worry about a bank giving me a mortgage for investment properties. I can close fast – in 10 days. That gets me some great under market value properties.
  • My real estate investment portfolio is safe and stable. I never worry about having a mortgage to pay when a renter skips town.
  • I incur less risk as I do not worry about appraisals on my properties. If your lender sees lower appraisals in your neighborhood, they may loan you less money.
  • In the real estate crash, I sold several of my all cash investment properties quickly when I needed money from my San Antonio investment property.
  • Buying all cash investment properties usually means you buy in affordable cities. Make sure you do research to figure out where to buy your all cash investment property. As of right now, prices are up in some markets, but if you save your cash, you may be able to pick up houses for a substantial discount in the next downturn.

In short, I recommend that people looking for an out of state investment property buy property all cash, as that is the best way to enjoy maximum cash flow with low risk.

 

Do You Have a $200,000 Salary and Hate Your Life? Buy Under Market Value Properties

I can’t tell you how many people I run into in my under market value  properties career who have good jobs and hate their lives.

That is, they make $200,000 or more per year and yet, they work 60 hours per week, sit in dull cubicles for years and years, and wish they had the time to do what they want to do.

The truth is, most of us have been conned into thinking that the ONLY way to live in America is to trade time for money.

And you know what Teddy our mascot says?

time for money

That’s right. If Teddy knows that trading time for money sucks, you should be able to figure it out too. Passive income is the way to go – with under market value properties – at least 20% below market value. Who wants to sit bored in a cubicle or office for most of their working life? It’s a form of slavery, even if you are well paid.

stop

I stopped trading my time for money at a very young age – 23 in fact. That was the year I bought my first under market investment properties in San Antonio (I’m 38 now). I financially retired at 28, in San Antonio, one of the best cities to invest in real estate.

And I probably had it a lot tougher than you do….by this I mean, I didn’t have a lot of capital to start with. I actually had to borrow capital at 8% from a private investor to buy much of my early portfolio in fixer upper houses. Yet I had plenty of passive income in under market value properties within a year of starting.

But a guy or gal like you…..you make $200,000 per year or more out there in California or Washington….you most likely have some capital stored up so that you can buy under market value investment properties, and STOP trading your time for money. This type of out of state investment property is perfect for you. Passive income fast.

Here is a quick plan to stop trading your time for money TODAY. I am going to assume you have some capital to work with (if you don’t, go find some private investors to borrow money from like I did).

If you live in a high cost area, strongly consider buying an out of state investment property.

This under market value investment property is one that I have scouted out carefully in a very hot part of 78201, which is north of down town San Antonio. It is seeing a lot of young professionals moving in and property values are shooting up. There is a good chance you could get a young professional buying this under market value property from you, or a hardworking blue collar family:

edison front

 

  • Address: 2229 W Hermosa Dr. San Antonio, TX 78201
  • Year Built: 1948
  • Description: Distressed property sale, 2 beds 1 bath, 769 sqft, lot size: .14 acres yearly taxes: estimated repairs: 35K (convert to 3 BR).
  • Max After Repair Value: $129,000.00.
  • Cash Price: $69,900 firm.
  • Exit Strategy: Owner finance 10% interest rate, $5000 down, 30 year note, $1100 per month PITI. Plenty of positive cash flow.
  • 10% ROI no maintenance.

Here’s how I was able to financially retire at 28 in one of the best cities to invest in real estate – I bought under market value properties just like these with cash or with borrowed cash. I do $35,000 in rehab (I now have a professional construction company that does this for me – no more getting my hands dirty). Then I resell the house with owner financing to a qualified buyer. What I do is super simple, and yet, so many people cannot see it !

The above out of state investment property will make you $1000-1100 per month, assuming you fund the deal with cash from your $200,000 or whatever job. In time you will be able to financially retire.

That’s it. Buy, rehab, resell, and collect the cash flow. It IS that simple. Lather, rinse and repeat. If I did it, Teddy says you can become financially retired too:

teddy2
I’m tired after all the rehab work today!