Tooting My Own Horn - What I've Accomplished In Last Two Months
I've relayed some of this at various times, but I thought I run it by again, mostly for those who hesitate. Don't.
Back in August, I was looking at my last $1000 in the bank. (I'm a relatively new realtor and struggling to build my business.) I had no money, but I have a house with a ton of equity, and a decent credit score. So I refinanced and pulled out $25,000. My mortgage payment only increased by $40 per month. I figured I could live on this money while I continued to build the business. In the meantime, not wanting the money to just go for living expenses, I took the plunge. There was this foreclosure listed for $70,000. A tree fell on the roof and they dropped the price to $31,000. I bought it with a construction loan at 1% above prime. The ARV was appraised at $90,000. My contractor has been working on it for the past several weeks, and we're about one week from completion. Money spent so far on repairs = $12,000. I figure there is another $5000 to spend - carpet, appliances, paint, paying the contractor. All this money comes from the construction loan.
Then I watched a foreclosed 2 bdrm, 1 1/2 bath condo drop from $39,000 (neighboring condos sell for $47,000 - $60,000) to $30,000. I bid $25,000 and got it. It will need about $500 worth of work, plus appliances.
So far, my out-of-pocket expenses include:
$2600 for the first house - (closing costs and $1000 earnest money)
$4300 for the condo (10% down payment and closing costs)
Because I am a realtor, I received $1000 in commission on the 1st house, leaving me with $1600 out-of-pocket, and $1000 for the condo, leaving me with $3300 out of pocket. So for $4800, I acquired two properties. I know some of the pros here get in for much less, but I feel ok about this.
I will sell the first house, and hopefully net $35- $40,000. The mortgage on the condo is $310 per month (which includes the association fee). I can rent it for $600 - 650 per month.
Sometimes I sit in amazement considering where I am now compared to where I was when I only had $1000 in the bank. I've got more debt, but it's "good" debt to me, because these are assets. And since August, I have closed on five properties for clients. Ahhh...life is interesting.
Good article!! I am needing to find my first deal myself. I am trying to get myself off the ground and into REI, but I seem to keep dragging my feet. I keep making excuses (need more education, no money, etc.) that keep holding me back. Do you have any advice for me to get started? I am thinking now if I could find just 1 property with profit potential, that would be enough to kick start things. I guess the bottom line is if it will make you money, do it!! Don't worry how...just do it!! Thanks again for the article
CG
I second that, and relate to what you said as well. Not to mention the nay-sayers. If I had a dime for every time I was told this is a bad idea I wouldn't need to invest in real estate!
Hi,
I'm basically in the same starting point you were at. Fairly decent credit and lots of equity in my home. I have looked for details on refinancing to pull cash out of the mortgage, and have seen lots of mention on this. But never really seen what to ask for at the bank. Is it a loan to value type of setup? I'm not sure. It definitely seems to have worked out for you. I would appreciate any insight you have on actually doing the refinance to pull cash out and use to invest.
Thanks in Advance,
Alfred
All I did was approach my bank about refinancing my house. I got it done with a no-doc, stated income. They appraised the house, closed the deal and wrote me a check, all in less than two weeks. With that cash in the bank, I applied for the construction loan and got approved - also on a no-doc. Then I started searching for a property. The rest, as they say, is history. I will admit that I am not totally a newbie at this. My ex and I bought, renovated and sold properties for a living. I was just the paper signer, but I paid attention. So as I was staring at that last $1000 in the bank, the lightbulb went off in my head that this was something I already knew how to do. At the very least, I know enough to get myself in trouble (as I like to say). Anyway, I tell people all the time -- take the first step, and the rest of the way will be revealed to you.
Good luck...and just go for it!
What a great story! What state are you in? I live in NJ and just getting started in the foreclosure game. I too am a realtor. NJ is a difficult state regarding forclosures - any advice on how to get started?
Life is amazingly interesting. You never know where is going to take you next. In your case, "Who dares wins" worked just fine. And you did help it by making the right decision to borow more.
Good Luck!