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How to Refinance a Rental Property - YouTube
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how can you refinance a rental property
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and pull your money back out and
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snowball your investments that's today's
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video let's dive into it
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hey there Clayton Morris long time real
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estate investor and founder of Morris
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invest you can learn more in the
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description below
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I've rehabbed hundreds of properties and
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I've done a lot of refinancing over the
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years to pull money out of the
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properties that I've rehabbed
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and placed tenants in and also houses
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that I've lived in permanently as my
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primary residence I've pulled money out
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of those as well so today we're gonna
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talk specifically about how to get a
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rental property add value to that rental
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property and then pull money back out of
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it in order to cash get more cash flow
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by buying more rental properties that's
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today's video so first I want to say
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that this channel is totally devoted to
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helping you become a passive income real
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estate investor if you're not already a
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subscriber we're gonna do a little
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subscribe break here with some music hit
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that little subscribe button down there
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and turn on the bell cuz that'll let you
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notified when we get new videos which we
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published three times a week go ahead
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take a little subscribe break if you're
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not a subscriber thank you alright
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now back to the content so today we're
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going to talk about this refinancing
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process and there are four key areas
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that you need to know about now number
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one you you may not be buying a property
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where you're gonna get a huge amount of
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equity after you do the rehab you may
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just get a little bit right but that's
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okay because if you're able to get money
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pulled back out from the bank that's
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money that you didn't have before what
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do I mean by that I'm just gonna say for
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round numbers let's just say you bought
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a house for $20,000 you did a little bit
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of repairs and it appraises at $30,000
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well they're probably gonna give you
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about 85 or 80 percent or 75 percent of
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that 30 right as a check to you great
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it's not a lot of money it's certainly
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money though and it's money you didn't
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have before you did this refinancing
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process so even though you didn't add a
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ton of value or that property is not
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worth $200,000 think of that as free
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money that you can then use to
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your next rental property but we're
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gonna be talking about numbers in the
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forty fifty thousand dollar range those
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are the properties that I like to buy
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all right step one in this process on
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how to refinance is simply to find a
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local bank I recommend going to local
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banks in your local towns where you have
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your rental properties and working with
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those local banks they are going to give
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you the best refinancing options stay
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away from trying to go to this big
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national banks Bank of America Wells
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Fargo those types of places because that
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no one's gonna know your local market
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like your local bankers will so they'll
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be able to assess the value of that
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property way better than a big national
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bank so step one make sure you work with
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and find a great bank in your local area
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that you can work with in order to
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refinance that property all right step
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two in this process is to make sure that
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you've got the right loan that's right
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for you so the bank is gonna say to you
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okay here's what we can do for you John
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we are going to give you a loan on this
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property for seventy-five percent of the
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value of the property so let's say for
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round numbers you bought the house for
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forty thousand you added a little bit to
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it and it's worth about fifty and
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they're gonna give you a loan on that
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for 75% of that fifty thousand dollars
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and that number is thirty seven thousand
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five hundred dollars now remember you
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bought the house for about forty
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thousand but it's worth fifty and the
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appraisal came in and they're about
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fifty thousand they're giving you thirty
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seven thousand five hundred dollars and
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the terms of that loan are going to be
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you know four percentage points four
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percent interest now think about that
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for a second you bought it for about
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forty the bank is willing to give you
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basically almost what you put into the
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property in the form of cash that you
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can then take and buy another rental
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property now you have that one available
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and done and you can do the same thing
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and rinse and repeat using the cash flow
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from your tenants to pay back these
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loans and you want to stagger them so
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you're snowballing that process it's
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powerful right well imagine if you just
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had a little bit more equity and the
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house was worth fifty five you pretty
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much almost be at a wash
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the money you put in is the money you're
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almost gonna get right back from the
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bank see how this works step three we
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kind of jump the gun a little bit but
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wait for an appraisal so you the bank is
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gonna do an appraisal on the property
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and that's where you they'll determine
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the value of that property so like I
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said fifty thousand that's what the
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numbers were working off of in the terms
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of the loan so if it's worth fifty
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thousand they're gonna give you an
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interest rate of about four percent and
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the value seventy five percent of the
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value of the property is the loan that
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they're gonna give you four thirty seven
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thousand five hundred dollars so you're
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gonna wait on this appraisal now
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appraisers can be a tricky Beast I've
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got a whole video here on appraisals and
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how you how to work with appraisals that
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come in low how to fight an appraisal
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that you see that seems like it's
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ridiculous and way off base so check
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those videos out because you may need
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that we're in a weird situation right
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now with appraisal shortages across the
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country and a lot of companies and banks
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are having to bring appraisals from
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other states into their state to do
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appraisers appraisals which is crazy
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right because you think that the
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appraisal would come in from an
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appraiser who lives in the area knows
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the area knows the streets knows the
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value and a lot of times they're
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bringing in appraisers from out of state
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it's not making for a great situation
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right now but you need to know how to
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fight them you need to know how to talk
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with the bank and say I think your
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numbers here are way too low and here's
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why so I've got a couple of videos I
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want you to watch on that exact topic so
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step three though is to get that
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appraiser appraisal back and see how it
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matches up with what the bank is gonna
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do for you and step four it's pretty
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simple step four is simply to close on
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the loan now you've got a loan on that
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rental property that you owned free and
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clear now the bank is gonna give you a
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check for that amount there you go now
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you've got the $37,500 what are you
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gonna do with it
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well I know exactly what I would do with
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it I wouldn't go buy a boat I'd buy
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another rental property and I would
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rinse and repeat so I would be able to
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refinance out of that one using the cash
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flow for my tenants to pay back those
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loans remember every time you add
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another property to your portfolio
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personal net worth has increased and
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especially if you're buying them like we
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do which is below market value adding
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value so the our net worth is increasing
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to fifty thousand right if we're buying
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it for thirty five to forty forty two
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thousand and it's worth fifty fifty five
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thousand my net worth is here not here
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so I bought it smart right and I was
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able to add net worth here that's the
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beauty of the refinancing and pulling
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that cash out but it's also the beauty
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of rental real estate I hope you found
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this video helpful we have a whole
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series of videos on private money
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turnkey real estate you name it right
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here on the channel click the subscribe
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button right over here if you haven't
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already subscribed to the channel but
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publish videos multiple times a week an
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effort to try to get you to take action
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get out there become a real estate
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investor and create cash flow and legacy
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wealth for you and your family it's the
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best way to build wealth in this country
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we'll see you next time everyone
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