INVESTORS’ CORNER: A game plan for success investing in real estate

INVESTORS’ CORNER: A game plan for success investing in real estate

I want to share with you some ideas on using real estate to become debt free and build your cash reserves. It has worked for me and I have also shared this with many other investors and it has worked for them also.

Many investors start out in real estate thinking that you have to “have money to make money”. That is not the case at all. You will need one of two things though; either good credit or cash…. remember that it doesn’t have to be your cash or credit as far as that’s concerned. It’s OK to start out with other investors until you can do it on your own. I would rather share the profits and have some of something rather than all of nothing.

We only buy when we can get paid and still cash flow the property. Let me explain. Let say you find a property that has an after repaired value or ARV of $100,000. Because the property needs $20,000.00 in work you can buy it for $50,000.00. Now you will be in the property at 70% of value once the work is done. Whether you paid cash, borrowed from relative or got a hard money loan for the purchase and rehab makes no difference. Once you have a $100,000 property you can now refinance at 80% loan to value or LTV and after closing cost pull out about $7000 to $8000 in tax free cash. Yes, you do not pay taxes on borrowed money. But just remember that it is still borrowed money and has to be paid back, even if it is the tenants that are paying it back. I do not recommend refinancing over 80% loan to value. This way you still have some equity for your financial statement and the property should cash flow with no problem.

Larry Goins a vendor member, past president and life time member of Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region, www MetrolinaREIA.com. Larry has forms and other information at www.LarryGoins.com.