Cash Outs Good Or Bad For 1st Time Investors?
Is there any information out there about doing cash outs first? I would like to use the cash to rehab and possibly do a lease option of just sell. Any thoughts and all advice is welcome. Please help.
" I would like to use the cash to rehab and possibly do a lease option of just sell"
what do you mean here?
unless you're doing a construction loan or hard money loan, i don't know any banks that would lend more than a property is worth, when it's ugly and needs repairs.
As far as cash-outs, some landlords do this usually after a rehab when they refinance. Use the cash for more investments.
Be carefull you don't into negative cashflow when you do this though..
It can be good as long as your rehab was good and you won't need to do extensive repairs in the near future and most importantly you can maintain that positive cashflow in the process. Put some of the money up for reserves and the rest is yours.
Pro: the money is tax free since it is not earned income
Con: it's a loan, when you do a cash-out that increases the debt on the property.
Pro: you have excess cash to use for reserves or more investing
Con: when the money is gone, you're still paying on it in your mortgage
Pro: actually you're tenant is paying for it
Well I hope that helps!
JB
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