Cash Out Refinance Explained 💸 🏠

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Жыл бұрын

Real estate investors can use a cash-out refinance to get cash from their property's equity. Basically, they get a new mortgage for more than what they currently owe, and the extra amount is given to them as cash. This is helpful if they want to invest in more properties or make improvements on their current ones. However, it's important to know that there are some risks involved, like higher interest rates and closing fees, and it's possible to end up owing more on the property than it's actually worth.
DISCLAIMER: please note that the information contained in this video is for educational and entertainment purposes only. You should always consult your own attorney and your own financial and tax advisors before making any legal or financial decisions. This video is not intended to and does not create any attorney-client relationship between the content creator and the viewer. The views and opinions expressed in this video belong solely to the creator and do not reflect those of his law firm or any of his business partners.
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Пікірлер: 19

@mraa4950 Жыл бұрын

Never thought about this way

@anyaneez8628 9 ай бұрын

Do you not then run the risk of owing more money to the bank and raising rent on tenants who may not be able to pay? Then what, kick them out and lose money while it's vacant? Taking the difference of a loan for yourself seems irresponsible because it's not really your money, it's always the banks. I still dont get how people pay themselves from this.....

@SucceedREI 9 ай бұрын

Sure. But possibly owing more to the bank than the property is worth (if there is some sort of huge market downturn) is always a risk whenever you are borrowing to finance any real estate deal. The difference between my strategy and that of most other investors is that they put 20% of their own money down and get a loan for 80% of appraised value from the bank at the time of purchase. I put 0% of my own money down, use private lender money to finance 100% of the purchase at below market value, improve the property also using private lender money, and then go to the bank and refinance at 80% of the after repair and improvement value. Because I bought below market and also increased the value over and above what it was originally, when I refinance, I get all of my private lender funds back out and paid back to them, have at least 20% equity in the property, and not risk any of my own funds to get the deal done (and cash flow it from the rents that it generates). Because the property cash flows from the rents, I don’t need to panic sell if and when the market takes a big dive (even if it dives below my 20% equity cushion). This is because my strategy is to hold the properties for 10, 15, or 20 years into the future. Rents come in and pay the existing mortgage and yield a profit and, if there is a huge downturn, I just wait for it to end and for values to rise back up. At the same time, the loan balance is being paid down further decreasing the risk. And the worst possible case catastrophic scenario (which I would never allow to happen anyway) is that the bank would foreclose on the loan. Since I didn’t have any of my own money invested, the only thing I would lose is the property itself. For that to happen it would really have to be something like the property stops being able to be rented to tenants and stops being able to generate any income and therefore it can’t pay the mortgage on it. There is no scenario that I can think of with the properties I purchase where that would happen and where insurance wouldn’t cover it. So, it’s not really something I’m concerned about. Hope this helps answer your question.

@bubbafox3922 8 ай бұрын

Cash out refi is cheaper than a business loan.

@user-ud6rb2vq9j 9 ай бұрын

But then you still owe $400,000 on the New loan. So even if you buy another property at $400,000 and you give the $200,000 you have as a loan, you'd still be in the hole a total of $600,000. You'd be in constant debt until you sold your refinanced property. Unless these are rental properties that will still produce a profit after refinancing I don't see why go into debt. How do millionaires make money going into debt? I can't grasp the concept.

@SucceedREI 4 ай бұрын

Right. These are rental properties. Rents cover all expenses and make a small profit month over month. The loans are paid down by the rents.

@SergeyKasimov 11 ай бұрын

With high interest rates you be sinking your boat each time you do this

@SucceedREI 11 ай бұрын

I’m doing it now and it is still sailing pretty well 🤷‍♂️

@hassanmemon6458 10 ай бұрын

Would you recommend doing a cash out refi in these times or wait ?

@SucceedREI 10 ай бұрын

I’m still doing cash out refis, but only because it makes financial sense to do so on the deals that I have. I buy properties using private financing interest only loans at 10-12%. The properties I buy are off market and my private lenders fund the purchase and the rehab cost. Once the property is repositioned and rents are increased, and value significantly increased as well, I refinance. Even if the bank rates on the refi are at 7.5%, it’s still better than an interest only non-amortizing private loan at 10% to 12%. So, it still makes perfect sense to refi. As far as pulling extra equity during the refi to use for other investments, it also still makes sense as long as your roi is going to be significantly greater than the mortgage interest rate on the money you pull out. If you can make 15% by reinvesting the money you borrowed at 7.5%, it still makes sense to do it. But, you have to be very careful and realistic with the projected profits from any deals you plan to put that money toward. Hope this helps!

@hassanmemon6458 10 ай бұрын

@@SucceedREI Your amazing thanks !

@Cloudman_ Жыл бұрын

Except the new rates will be dog crap 💩 every month interest rates are higher and higher. Works when they are down like they were for the last decade

@SucceedREI 4 ай бұрын

Still works today if you buy the property below market value in the first place, renovate and increase rents to further force appreciation and then refi at the improved value.

@user-lw8zs4ir9g 7 ай бұрын

But after you pay off the old loan and have this wonderful $200,000. You still have a $400,000 loan to pay back??? Even if you buy another property with 200k on a 500k property and take another loan, you then have to pay back TWO LOANS. Can someone please explain? im 19 and new to real estate and really want to understand.

@CooperMaxey-xm5ju 7 ай бұрын

I had this question as well, I am 18 and was wondering how this made any sense as well. It seems you are almost resetting the clock on the loan time because now you have more to pay back?

@tatepurvis4705 6 ай бұрын

I’m 18 as well and have the exact same thought. If you find out the answer could you lmk plz? Thanks man

@Akitalemo 5 ай бұрын

If you have loan of 200,000$ your monthly payment will be around 1000$( less or more). After you take a new loan of 200,000$ your monthly payment will dabble. The point is that you have to have a high income to cover this amount to convince the bank to use the equity. In this video doesn’t share this information.

@Terpzzz Ай бұрын

same i’m 20 but still stuck on this part

@romancebuie8390 8 ай бұрын

In understand everything you’re saying but it’s so aggravating listening cause of the big words you’re using. I mostly wanted a short on this topic to share to someone else. Your video wouldn’t help a novice understand anything