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Michel Lautensack's Blog

By Del Val Realty & Property Mgmt | Broker in Malvern, PA

4 Ways to Get Money Without Selling!!


Four Ways to Get Money From Your

Real Estate Without Selling!

 

By Michel E. Lautensack

 

If you have an existing piece of income-producing real estate that you purchased within the last few 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.  The question is, 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? 

 

Here are my top 4 ideas 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 the 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 there are many, is the tenant/buyer typically pays you 3% to 10% of the value of the property upfront in the form of 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 legally keep the deposit and perform the entire process 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 the first mortgage alone will be lower than a first and second combination as described 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 savings 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 actually 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 without having to sell your property.  This has tremendous advantages in allowing you access to cash to pursue new projects or pay operating expenses.

 

About the Author:

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, Pa and creator of the Private Lender PowerPoint Presentation Kit.  This kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your business.  To learn more about this powerful step-by-step kit and receive your FREE Private Lending Newsletter go to www.RealEstateWealthToday.com.

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