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Cash Out Refinances on Rental Properties - YouTube
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why do banks like doing cash out
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refinances on a rental property that's
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today's video let's get into it
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hey there I'm Clayton Morris on the
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founder of Morris and vast I'm a
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longtime real estate investor and this
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whole channel is devoted to helping you
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become a better real estate investor in
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creating passive income and today I want
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to talk about passive income and why
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banks like giving money over to you when
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they see that your rental property is
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performing and is producing cash so you
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know you probably think about getting a
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mortgage on a rental property you
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probably think about hey I don't own it
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yet I'm going to go to the bank they're
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going to give me money and I'm going to
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buy it yeah that's one way to do it but
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the way that the bank's really like is
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when you've already bought it
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maybe using your own cash so you have
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some skin in the game you own that
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rental property now you do what's known
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as a cash out refinance so what you'll
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do is you'll go to the bank and say hey
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folks I've got this property and guess
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what
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I've already renovated it using my own
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cash and I've got a tenant in the
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property with a year-long lease or a
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two-year lease or a five-year lease and
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it's producing eight hundred nine
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hundred dollars a month in positive cash
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flow and that banker is going to look at
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you and say ding-ding-ding whoa yes I'll
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go for it right now so there's a couple
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of things at play here and why they like
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doing it this way number one it's the
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cash flow right it's an asset that they
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see is performing already it's not the
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promise of it performing as in scenario
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number one before you buy it
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know it is performing they can see the
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least they're going to want to see the
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lease agreement and they're going to
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want to see your bank statements to see
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that this tenant pays on time
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so that's number one number two they
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like to know that you have some skin in
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the game that you've actually already
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purchased the property that shows them
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good faith that you believe in this
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property and therefore they're likely to
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believe in it too so those are two big
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things going for you the other great
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benefit of it is that they're really
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going to look at the asset itself the
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property itself and they're going to
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care a little bit less about you as
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the investor as you the person that's
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paying it back why well number one the
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tenant is paying them back in a way if
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you think about it the cash flow from
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that tenant is going to cover the
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mortgage and I've talked to a number of
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bankers that said that they would take
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that scenario any day of the week if
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they could look on paper and see that
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the mortgage they're about to give you
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is gonna cost you three hundred and
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fifty dollars a month that's what you're
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going to have to pay the bank but you're
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bringing in $900 a month from the tenant
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that's a no-brainer
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that is a no-brainer to a bank and right
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now your local banks and frankly the
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large national banks are scrambling
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because interest rates are so low they
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want business but under the federal
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rules for what they can lend on the
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front end before you own the property
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it's very very stringent you can thank
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the dodd-frank law you could thank all
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sorts of moves in Congress given the
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2008 crash that make it difficult for
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you to acquire the property using a bank
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but once you do own it and it's cash
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flowing now things loosen up a little
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bit in the banking quarters and they
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want that business they want you to put
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your money in their bank and they want
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to be able to make some money off of
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your property it's a no-brainer so that
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my friends is why banks love doing cash
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out refinances on properties and hey you
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can even go ninja level and take a bunch
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of your rental properties maybe bundle
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it together maybe you've got five or ten
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of them many of our investors do that
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they'll buy five properties with us
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they'll do a cash out refinance get the
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money right back out and buy five more
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and then use that money to pay off the
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first loan and they snowball it and
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that's how my friends the rich get
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richer using this strategy it really is
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an amazing strategy and guess what the
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banks like it there you go that's
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today's video on why banks like doing
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cash out refinances i'd love to hear
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your comments you can put them in the
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thread below and please subscribe to the
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channel just click on the big red
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subscribe button if you're not already a
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subscriber
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we're devoted to bring you great content
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on how to become a better real estate
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investor and how to take action we'll
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see you back here next time with another
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video everyone have a
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