This is the absolute best example that I've seen so far. I thank you so much Mark for sharing your journey with us. Your delivery was very relaxed, smooth, and informative.
"that's all I got for this video" WHAT... that was alot and you didn't have to scream and jump around with a whiteboard, telling us about that new Gulfstream jet you are getting "delivered" tomorrow! THANKS Mark
This video is pure gold. Ive searched all over youtube trying to understand how a cash out refinance works and its pro's and con's. Finally found a simple practical explanation with real world scenarios and not baseless assumptions. Thank you Mark! you got yourself a new subscriber.
Really, thank you. I've been looking for a straight forward explanation on exactly how this works and you delivered. I'm a newbie at this and you've explained it so well leaving out all the fluff : )
I like how you managed your business, youtube, instagram, blog, family, and everything else while teaching us how to invest. You're the best Mr Ferguson. Also, I've just bought your book The Book on Negotiating Real Estate.
Thank you! This was a brilliant breakdown on a BRRRR deal! Such a great case study! Would you consider doing this for another "less great deal" that you also did a BRRR?
Mark: Thank you, thank you, thank you! You explained what I have been trying to learn about the BRRR strategy in ONE concise video. You avoided the fluff and the joking around that ruin the BP videos. And you did it with actual numbers on the screen so I conceptualized everything much better. I really appreciate your candor and transparency. This will be marked as one of my favorites.
Thanks for the INFO! I'm trying to decide now if I want to cash-out refinance my home now, or just refinance the current loan amount, to lower the monthly payment for higher cash flow on a monthly basis
Awesome content. Just subscribed. I bought my first income property 2 years ago. I paid for it by using a HELOC on our primary residence so am still paying back our HELOC and am cash flow positive by a few hundred a month on rental. With no actual mortgage on rental, I’m interested in a cash out refi on that property (worth roughly $170k) so thinking $120k or so I could pull in cash on it to then get into another income property? Does that sound reasonable or would I be over leveraged potentially since I still have our HELOC out as well? Appreciate the info
Great content. Thank you for sharing. I do have a question about the rehab costs. the $12k rehab included labor and materials? How much was the labor, and how much was the materials?
Great video, is there a type of home equity loan available for rentals? In NY there is a 3 % refi tax but if it's a HELOC the bank sometimes picks it up.
thank you for the information. some question: 1. the first loan you got on the house back in 2012, was it a investment loan? 2. the refinance loan you got in 2015, is that a investment loan too? I am in a situation that i am buying a rehab property with cash, but some lender dont do cash out finance on a cash purchase. they only do it on primary resident loan. thank you in advance on anwerying my questions.
yes, good video illustrating the concept thank you. Just two comments or questions: Did get a cash back of $51,557 instead, while putting down $3942 to make for the 25% dn? That point isn't clear from the video. (2) What happened with that capital gain in practice? I'm guessing whether REFI is a good operation will depend on the interest payment (of the 51k reinvestment in this example-assuming that's the case). Would need to compare the NPV between the 2 alternatives (no REFi vs REFI), I guess Interest payment will be key. Seems the ROE on the exiting house is taking a hit with REFI but keeping everything equal, I evaluate the REFI operation is coming ahead using the numbers form the video. That would be even more true if a new opportunity became available.
That seems like it will only work in those very unique markets. I would think it would be easier to buy that house, fix it up, and then just sell it out right and get all of the equity. Do that until you can buy a property out right in cash and pay it off and then rent it out. I mean in your example you bought the house for 109k and it was worth 191k 3 years later and you owed 84k. You sell it for 191k and then you have a little over 100k after closing in cash. That is nearly what you paid for it. The next house you find like that you pay cash for and own it outright. You then pocket almost the entire $1500 rent. I mean I get the idea of using other peoples money but with a market that allows for such huge profits it just seems better to save it up and buy a home in cash and get all the rent. In my market those sort of deals don't come along often and when they do there are a line of investors around the corner waiting to pay cash for them on the spot. All the rest of the "deals" I might can fix up and make 10-15k on if I sell it, but the rent would be even worse. Trying desperately to find that home that is worth say 120k that I can buy for 70-80k, but they don't come around often. They are usually worth 120k and a "deal" is getting them for 100k. But after closing cost and upgrades to fix it up and its not worth the flip. The real value flips are gone in days to cash buyers.
Mark, great video. What if you wanted to Refinance the home to pull money out, but it wasn't enough to pay off the original balance? Can you still refinance it and pull some money out based on the new appraised value, and use that money to but some more property? Of course it wouldn't be a cash out refi. Please let me know what your thoughts are.. thank you!
Thanks Mark! This was a really good example. Does it ever make sense to refinance the same property twice? In your example, you mentioned your cash flow would be too low. Is there any scenario where you'd take that 2nd refinance option or do you mainly stick to 1 refinance after you've increased the value of the property through rehab Similarly, is it ever better to not refinance to maximize cashflow? For i.e, say you had enough capital for a 2nd property, and you didnt need to pull money out. Would it have been better to keep that money in ? --edit-- ok, after doing a little more research i think it comes down to ... if you were to refinance, and redeploy that money into a new investment, would you get better returns. if thats the case, in your example, despite your cash flow being much lower, wouldnt you have been able to get much better returns in another BRRRR? The next question might be if you have enough reserves to support a close to nothing cash flow property.. Thanks!
Hey Mark, thank you for that video. what would be your total interest rate on the ARM period. I am doing a refinance cash out no debt loan and comparing between ARM and 30y fixed. my ARM period starts with 7.95+labor which seems too high. my fixed is 5.875.
Nice info I have a few questions. Do you use a mortgage broker? I'm told once you hit 10 traditional mortgages you need to do commercial is this true? If so have you had any issues with them calling in the loan after 5 years?
@Mark Ferguson - InvestFourMore Who is your portfolio lender? I'm having trouble finding any banks that will do a portfolio loans. If you don't want to tell me the institution, can you tell me the type of institution? Credit union? Private lender? Big bank (Bank of America, Wells Fargo, Citi Bank, PNC, etc.)?
So now that it's 2019, what do you suggest folks who are starting out in REI do? Since prices are so much higher now compared to 2012? What's the best way to get that FIRST property.
buy a primary residence with a low down payment. Then move out after a year or two and turn it into a rental house. then buy another primary residence with a low down payment.
Hey Mark, my names Thomas Dowd. I’m a real estate investor out of Denver. I’ve shifted my focus to rentals. I’d like to talk with you see what your currently doing and just learn and network. I have a rental in Englewood I just did this. I found some out of state markets that have numbers like your talking about in this video. Hope to hear from you.
When you refinance do you use the same bank? For example what if I got a private money loan? Could I then go to a bank and ask to get a loan against the property that they didn't original lend for?
I’m trying to refinance another rental I have excellent credits but the lenders won’t go below To 2.75 they said it can’t be done with a rental only if your living in it the price will go down- so I know of a good lender ?
hello mark I was wondering if you can give some insight on how to obtain a rental contract? Do you talk to a lawyer or real estate agent when creating a rental contract agreement?
Mark, short question to you: eventually, market will slow and there will be a downturn. Are you going to sell all properties at the highest sometime soon and pocket cash and then hit the buying spree after market hitting lows?
If I have the 20% downpayment for a house but a 600 credit score and only one year's worth of w2 income how do I present that to a lender to get a loan or even a refi? I own one rental property free and clear, but all the banks want are good credit and steady income from me.
That strategy works well when values are going up but not when properties are going down. Values now could go down. We will have to wait and see. I've had the value of my primary residence go down. It is in Thornton. I need to sell it to buy two other houses in Texas so that hurts.
Good video Mark. I just had a question about the BRRR. When you refinance a property doesnt your debt go up. So when you buy another property, wouldn’t it be hard to refinance that property because your debt to income ratio will cause problems. Especially when you get to your 5th refi, you’ll even run into more problems with DTI and getting approved. Please advise? I’ve watched many videos on the BRRR strategy, but no one talks about this obvious problem.
Very clear video! There’s one aspect I’m stuck on: when you refinanced and got a new loan at $143,500, what do you mean by “pay off the old loan” and come up with the loan amount of $84,000?
Thats the money he had left to pay from his initial loan ($109k-$22k down- $3k paid from 2012-15). New loan = 75% of new market value for his home 🏡 ($191k). Cashout = New Loan - current loan balance. Took me few google and RU-vid to understand this.
At 9:29 you mentioned that when you buy a house its typically 20% down with a conventional loan but when you refinance lenders typically want 25%. Why would you need a down payment for a refi? Doesn’t that mean you’re just pulling the equity out of the home? Thanks
So, in the end you said to be mindful on not pulling out too much due to cash flow. Should you only refi. Once? Or not necessarily, but just look at your cash flow before doing so? Also, when refi. more than once should you be cautious not to pull out too much because then your cash flow shrinks and you can only rent as much as the market will let you?
Thank you for your response. I had one more question if you don’t mind. I understand you have to pay for vacancy in the time of Reno. Did you have that money/capital already or did you receive it from a job? The same for the Reno. part you paid $12,000 for Reno. Cost was that $12,000 up front or just total expenses after you finished the Reno?
Isn't it true that when you refinance and take the money out, that the money is tax free? And with enough tax write offs your cash flow is tax free also? So essentially a money making machine!
Have you tracked the cash out money that was used for re-investment and calculated the return on that capital and applied that to the overall return from your original investment ? ... just wondering if it is worth it to go that deep into the bookkeeping
When you say cashout on the property, the loan is paying off your initial investment plus rehab, but you still need to pay back the loan. Is this where the rental income comes in?
When you say maintenance , who does the maintenance for you monthly ? And also when you refinance , you always raise your rent along as well ? Because your loan amount went up
@@sengphosaraj9437 I have a portfolio lender that does not have a year seasoning when doing a cash out refinance. They will also just qualify someone with the rental income only. go to www.mortgagelendersinsacramento.com/
@@investfourmore That is why it is a food idea to put some of that cash flow be it even small in some kind of saving so that you can buy more investments.
Thanks for this but Need more numbers details ... specifically how does the BRRRR process go. Step by step ... break it down like I was a fifth grader. 🤦🏾♀️ I’m just not getting it b
I will admit that I am more a fan of 100% paying off my rentals, rather than keeping the high cost of a mortgage. I suppose I hate bankers Enough to do the work to not need to have mortgages. This may be contrary to many other real estate investors.
Mark Ferguson - InvestFourMore - It isn’t necessarily bankers, it is how much it costs for their services. My preference. It slows things down but having rental with no mortgage relieves the stress of paying the mortgage versus just paying taxes and maintenances. Again, my preference to do it this way but really, I have no problems paying for services but interest is so expensive for the services received. Yes, they loan you the money but that’s it. For that type of money, I expect a lot more. Look at the amortization schedule and see how much you’re paying and what they’re doing for you.
@@MrJeddurso wow, you need to stop worrying about what you are paying the bank and how much more money you can make with the bank helping you. 4 or 5 percent interest rates are so low! That is almost free money since inflation is 2 or 3 percent. When I can make 15 percent or more on my rentals it does not make sense to not use loans at 4 percent. Check out this video on 15 vs 30 which shows why the amortization schedule is not that bad. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-CBcDo31-Mtw.html. Here is another video on cash vs loan. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-VpooluoST9c.html
@@investfourmore 1. Hey Mark have you ever looked into Infinite Banking where you can basically become the bank? 2. I heard Caeli Ridge from Ridge Lending talk about this new 30 year All-In-One Loan they're offering that operates similar to a 1st Lien HELOC. It seems investors could benefit from this by having fluid access to their home’s equity dollars without forcing them to refinance. What do you think Mark is this a game changer? www.getricheducation.com/episode/240-new-1st-lien-heloc-all-in-one-loan-with-caeli-ridge/# www.ridgelendinggroup.com/aio-loan/
1. Yes, you are no where close to the bank. It is a fancy marketing scheme. THere are some ways to use whole life insurance to your advantage but there is no such thing as being your own bank. It takes years and years to build up more money than you would by simply saving it. 2. What is different from a regular line of credit that has been around for decades?
When you get to the "fixing up" stage, what do you do if you encounter asbestos? I have this problem on a 'paid off' house I inherited. I would like to keep the house, but I am scared that the asbestos abatement cost is going to be VERY expensive! So, how do YOU deal with the asbestos problem when you encounter it? Thank you!
1. we don't take it out if we don't have too. 2. It may not be that expensive if there is not much 3. Get a lot of quotes! Some companies make a killing overcharging
Wouldn’t it be beneficial to cash out refinance the max loan to value if someone was looking to sell the property in the near future so they only pay capital gains on the equity?
Mark Ferguson - InvestFourMore Tyvm for clarifying. I was under the impression that cash out refi was tax free because it’s on debt and the difference between the loan and sale price would be taxed.
Mark Ferguson - InvestFourMore Mark do you create a reserve account of some sort for these items like vacancy, maintenance etc to go into? Do you have a video on how you set the accounting up for that?
How can you get a lender to loan on a investment home when you've already got a primary house payment and you're a single income earner who's making moderate money?
Mark Ferguson - InvestFourMore I wish it was that easy but the home I'm living in is an investment in itself being a five-minute walk from the Atlantic Ocean. Also the home is not expensive for me because of when I bought it
Why do they want to raise my interest rate though? I don’t see the benefit in resetting the loan, paying closing costs, Va funding fee, and higher rate to get only 80pct of equity out. Wouldn’t it be better just to sell the house to get more equity out?
People don’t forget you still pay taxes on your profit. If it’s under your name it’s added income so at end of year you still need to remember that part. I’m learning more about how to avoid that any suggestions
How do i refinance the entire amount of equity so that i only keep in my down payment? I want to replace flipping with BRRRR because its simply the same thing but better, if you put $100k into a house you will get about $200k total equity in the house so you can sell the house and pay sales tax and income tax or you can just re finance and pull out the entire $200k tax free etc... i would think as long as you keep your down payment in equity how can you not re finance the rest of the equity?...
@@investfourmore With doing that cant you still not get at the 20% equity? Im doing a fha loan 3.5% down and want to get at all that equity other then the 3.5%... thanks sir.
How Mandy houses per LLC and what banks do you use to get the loan? Do you get the loans on your name than change it to your LLC or buy it directly with the LLC! Thank you for all the great info
How are you Financing the Rehab? I am thinking of taking a personal loan to do the rehab and pay it back when I refinance. Is that a smart thing to do?
Wow if you refinance now in 2021 with the low-interest rates you should have a lower payment. My interest rate on my rental property is 3.1%. Bought my rental property in July 2020.
What Lender did you use? Did you shop 3 or 4 lenders first? You should have done a 15yr re-fi instead of 30 yr. But I know you just want to keep your note low. I prefer to pay them off faster.
