Looking for ideas on leveraging... - Posted by George

Posted by Don Dion on June 06, 2005 at 15:41:24:

If you can get a seller to carry back a second you can do a deal like this: 1.25 mil pp , first for $937,500 seller second $187500 down $125,000 depending on your fico scores and other income. I would have to run the numbers for you to see if your debtservice works with the second in place but many do. I have had investors calling were the seller is taking back a second based on the 5yr t-bill for the prepayment period and then we will do a cashout loan to pay off the second at that time.

Looking for ideas on leveraging… - Posted by George

Posted by George on June 06, 2005 at 10:49:56:

I am an investor in the DC Metro area. I am currently selling my SFH’s to build the cash for a large Multifamily. My goal is to get up $400k. I currently have $200k.
Is there a way to leverage the cash I have now to get more cash? For example, a loan where I put 50% down on a $400k loan or a business line of credit using my cash as down payment to get a larger sum.
Is it possible to get a business loan? I am property managing my properties via a seperate company from my asset holding company.
George realestatebirddog1@yahoo.com

Re: Looking for ideas on leveraging… - Posted by ray@lcorn

Posted by ray@lcorn on June 06, 2005 at 22:09:18:


I don’t know where you are in the process of selling the SFRs, but you’re sort of mixing two strategies.

If a credit line is what you’re after, then you may be better off securing the line with equities from the houses. Be aware that to use a credit line properly your business model has got to include a way to pay off the line, whether through cash-out refis or sales. The former requires that you put the CL funds into properties that you can quickly improve the NOI and bump up the value. The latter generally involves having a flipping mentality, buy low, sell high, and do both quickly.

If pyramiding assets is your goal, meaning you wish to increase the overall size of your portfolio, then there is no better vehicle than 1031 exchanges. That uses the equity as leverage to obtain more income, which in turn creates more value, which in turn increases the equity. If you were to sell the houses and combine the funds (this is tricky from a timing standpoint), you could then buy a bigger deal with upside potential, improve income and value, then refi to get your cash out, then later on, exchange again.

If you’ve already sold the houses and are sitting on the $200T in cash now, then you’ll best leverage that with the strategy that Don outlined in the post below. However, be careful to not overleverage the deal. This article, http://www.real-estate-online.com/articles/art-203.html points out the importance of understanding the break-even ratio in structuring deals.