My wife and I are starting a rental property business.
We live in So. Indiana and there are many REOs that after a few months on the market can fall into Property Manager’s 2%, $100 a door rule in rural and blue collar areas, not just war zones. We’ve read Rossi’s book and many others and feel prepared.
We have around $25,000 in cash to start the business with.
We are in the process of buying our first property, an REO for $7000 plus closing costs. I estimate the repairs on this property at around $8,000-$13,000. With luck, we will be all-in this property for less than $20,000 and have at least $5,000 for rental emergencies.
We are forming an LLC for this business. What can we expect as far as refinancing when we get this property fixed and rented in a couple months?
Our goal would be to cash back out the $20,000 we put into it. I would guess the property would appraise at 39K-49K. Will local bankers cash us out if the appraisal is high enough? Do these loans no longer exist because of the credit crunch?
With the cash, our goal would be to pyramid the business and buy our next REO for cash.
Is this the right way to approach financing?
Thanks for any insights.