i am currently working on my 1st rehab/flip and i have an idea but i need to work out the bugs in it.in my area i can buy houses all day for 20,000 and rehab them with a few thousand and get the arv at about 65000 to 75000.now if i buy the house cash for 20000 and i repair it and rent it out can i want to take out a 70% mortgage or line of credit on the property.now the ? is i know that i can do that but i want to continue to buy property and continue to do this with every house i buy so that i can get a lump sum of cash after the rehab and i will be making a positive cash flow of several hundred dollars a month but the only problem i see with that is the debt to income ratio.i know i could do this several times but i would like to know how i can do this about 12 times a year and i am just curious if this is doable or could there be a problem.
Hi him…
My wife and I are teamed up and here’s what we do:
Find a house that meets our specific requirements (size, condition, school district, price, neighborhood, etc.) and make an all-cash, close in a week low offer. We buy the property as we have said – all-cash, close in a week. We do whatever refurb is necessary, usually a lot of cosmetic stuff (paint, flooring, blinds, yard work, some landscaping, etc.)…then we rent it out for full-market rental rate. Once we have finished and have a renter in-place, we do a cash-out refi for 80% of the FMV. You will have a new, higher appraisal AND a rental contract showing an income stream.
I think that this “cookie cutter” will work in your situation, too provided that you have the capital to get started. We do this as a part-time thing and we are doing well…all of our properties have at least $200 positive cashflow after ALL bills are paid (including PITI, maintenance, management, vacancies, and a small reserve). We usually wind up breaking even on the up-front costs after we refi, so we get all of our capital back and start over. In a slow real estate market, you will be very surprised with what power an "all-cash, close-in-a-week offer can have! It works for us!!!
Keith