A potential client we worked with recently told us their experience using a Cash-Out Refi and how they purchased an $800,000 unit for $200,000 of actual cash. Here’s what went down:
The buyer negotiated an all-cash deal for four units in Pomona, California. Sellers are usually excited about quality all-cash offers. They typically close a lot faster than an offer with a loan that requires an appraisal, and generally, cash offers have fewer hiccups along the road.
The closing timeline and terms are usually in the seller’s favor. In this case, the buyer purchased the four units for $800,000.
One month later, the buyer went to the bank and did a cash-out refinance and pulled out 75% of the loan value. By pulling out 75%, he was able to get out $600,000 of the $800,000 that he had put into the property, now it’s cash in his bank account. Of course, now he has a loan payment on the $600,000, but in this situation, these four units are renting for $1,500 each, which will bring in a monthly gross income of $6,000. The cash flow is enough to cover the loan payment each month and all expenses, and in this scenario, giving a positive cash flow.
In a cash-out refinance, you can use cash to purchase a property, and then you can get your cashback up to 70-80% of the loan. And continue repeating. The buyer is getting into a property they own and control and have rental income using only $200,000 of actual cash. The rest, they get it back.
This strategy is an effective way to build wealth, and with a few experts on your team, you’ll be able to accomplish it.
Contributors: @PabloFPomes, @MichaelPomes
mike’s 2₵: Forced Equity
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