I saw a post that said that you can but a house well under FMV and refinance the house at FMV and then use that money that you got from the refinance and invest it with a hard money lender and get a big return. An example of this is if you buy a house that has a FMV of $500,000 for $400,000. After you refinance it you would receive $100,000. You would then lend that $100,000 to a hard money lender and get a return from that money. I can not find the original post. Do I have this information right? How would I go about doing this? I want to start investing but I currently have very little money do to the fact that I was unemployed for the last year. I recently just got a very good job and now I am looking at getting into investing.
Here is my personal advice. All other forms of investing are inferior to real estate investing. Why borrow money from your real estate to invest in some lesser investment class? I would only borrow money against real estate to invest in other real estate.
Right on the money!
HML can help you finance up to 100% of the purchase price. Typicaly they will fund about 70% of the after repaired value (which would be the as-is value if no work was needed).
HML are always looking for additional people to invest with them as well. I do have a person in St. Louis who will accept a minimum of $10,000 and pays 10% return. Another in NC with a minimum of $100K paying 15% return. Another in NJ.
It may be better to consider selling the property versus refinanicng it. You can do a cash out refinance immediately after purchasing with no title seasoning. With only being on the job for a short period you would have to qualify under a no employment loan. Your rates will still be good and would need to be factored in to how much you were getting on the return. By selling you would run in to tax hits. So it may be best to discuss refi/invest vs. sell/invest with a tax advisor.
Let me know your thoughs.
HML are always looking for additional people to invest with them as well. I do have a person in St. Louis who will accept a minimum of $10,000 and pays 10% return. Another in NC with a minimum of $100K paying 15% return. Another in NJ.
How does it work? And what is the risk to people who invest with them (HML)?
Thanks.
Hi Tracey,
Each lender is a little different.
Information for the person in St. Louis is below.
10% return
Investor can draw off what they wants in 24hrs anytime if needed…large amounts like $50k+ may take 90 days
No upfront/back load
Check each month for interest or can compound at 11%
Only lends on what he can touch, see, smell - no rehab funds
Can provide p&l up to date
Notarized note such as stock note
Current investors range from 10k-500k
Have other lenders that require higher investments and more detailed explenations. But the principal is the same. HML lenders need to get thier funds from individuals who realize a financial portfolio of stocks may not get them to retirement goals. They can diversify into real estate with out even having to own properties.
Thank you, Ben, for your reply. I’ll keep your contact and consider it as an option if I can’t find enough deals in 2 months.