If you have an existing piece of income producing real
estate that you bought within the last couple years, you
most likely have a significant amount of equity in that
property. Even if you put a traditional 80% mortgage on
the property when you purchased you may now have anywhere
from 20% to as much as 60% to 70% equity on the property.
How do you get that money out and put it to use in a new
investment or use it to pay bills without selling your
property.
Well, here are my top 4 ways to put cash in your pocket
without having to SELL your real estate... Place a private
second mortgage on your property - One of the best ways to
get cash out of the property is by borrowing money from a
private lender and giving them a second mortgage on the
property as security. By way of an example, if you bought
a property 5 years ago for $100,000 and put an $80,000
mortgage on the property at the time of purchase you had
$20,000 equity. That property today may be worth $130,000
and mortgage paid down to $75,000 leaving you with $55,000
in equity. If you borrowed $30,000 from a private lender
you now have $105,000 in total debt on the building. This
leaves the debt-to-equity ratio at a very reasonable 81%.
We do not recommend ever going above 90% debt-to-equity to
allow some margin for future down turns. One of the
primary ways we attract private lenders is through group
luncheons and private meetings. We use the Private Lender
Presentation Kit as our primary marketing tool to generate
leads and convert individuals into our program.
Put a Rent-to-Own Tenant in the building - Under a
rent-to-own program a renter with the desire to ultimately
purchase is given 12 to 24 months to rent while fixing or
improving their credit to the point where they can get a
mortgage and cash you out. The great advantage of this
method, and are many, is the tenant/buyer typically pays
you 3% to 10% of the value of the property upfront in the
form a non-refundable purchase deposit. This deposit can
be anywhere from $2,000 to $20,000 cash in your pocket. If
the tenant/buyer does not cash out or decides to move out
you can legal keep the deposit and do the whole thing over
again. Another advantage is that a tenant/buyer feels much
more compelled to pay rent on time to get the purchase
price credit that is only given if the rent is paid on time.
Refinance the existing mortgage with a new private lender
mortgage - If you have an existing first mortgage on a
property you can refinance the whole amount for new higher
first mortgage using a private lender as your lender.
Using the above example, if you have property worth
$130,000 with a $75,000 first mortgage, you could refinance
the first mortgage with a private lender for $105,000 and
cash out $30,000 for yourself. The advantage of this
method is that the cost of first mortgage alone will be
lower than a first and second combination as describe
above. You also avoid having the loan show up on your
credit report and this usually improves your credit score.
Use your property to secure a line of credit - If you have
one or more properties with a significant amount of equity
you can use that equity to get a line of credit from a bank
or local saving and loan. Again using the above example of
property with $55,000 in equity you may be able to get as
much as a $30,000 line of credit. We have found that banks
will never go above 80% debt-to-equity with these types of
lines. This type of financing has several advantages
including no interest cost until you actual use the money
and generally the interest rates are very competitive in
the prime plus 3% to 6% range.
In Conclusion, we have outlined four ways to generate cash
from your real estate with out having to sell your
property. This has tremendous advantages in allowing you
access to cash to do new projects or pay operating expenses.
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Mike Lautensack is a real estate entrepreneur and creator
of the Private Lender PowerPoint Presentation Kit. This
kit is loaded with tools and techniques to attract a
consistent stream of private investors. To learn more
about this powerful step-by-step kit go to
http://realestatewealthtoday.com/index.html
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