The Greatest Financial Magic Trick in Real Estate (in 57 seconds) #shorts

This is the power of using OPM, Other People's Money. The technical term for this is a cash out refinance.

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#realestatefornoobs #realestatedevelopment #realestateinvesting #shorts

[DivergentTalk]

The catch is how the renovation increases the property value by 50% and find the bank to agree to it.

[jeremywolf]

Introduce me to your friends and familly 😂😂😂

[TheProptechScout]

Some more technical details since it's come up in the comments:
This is called a Cash Out Refinance and you don't have 2 loans at once. The 2nd loan replaces the first. It's performed on a syndicated commercial deal (i.e. you create an entity with multiple investors), so you would not take out a personal mortgage to pull this off. Individual loan metrics like Debt to Income ratio (DTI) do not matter here because it's not a personal mortgage.
Instead, the commercial loan metrics that banks would use are:
1) Debt Service Coverage Ratio (DSCR) - what multiple of the debt service payment your cash flow covers
2) Debt Yield- your NOI as a % of the loan amount

[BrokTheLoneWolf]

True. But to clarify. You are turning $100k cash to non liquid equity of $500k. And although you own the entire building, because you have debt on it and because you already accounted for the equity it’s more accurate to say you CONTROL it. But you also own the risk.

[juangreenwich]

This is legitimate. It is hard to understand and it seems too good to be true. It can be done! Anyone interested has to learn how to do it... Be persistant and fnd the right building/property that meets the requirements. Education is the key.

[adarshpp]

1) 1mn property becomes 1.5mn in no time? Hmmm
2) Friends and family get 50% return and you get 500% return, will they agree to this? Is it fair?

[sarahialbornoz]

my question is how do i get the 100k that i put down from the original portion if i have no money? would that mean taking out another loan or looking for partners and private investors!

[BlakeMarceauxGolf]

The interest payment on the same building after renovation won’t change much you are using the BRRRR method. Risky IMO, raising money is easy but having cashflows are more difficult especially when overleveraged

[ericriera]

What do you mean exactly when you ask bank #2 for 1 million against the building ?

[jip]

Until interest rates spike as they did in 2022. Remember you still owe the bank a significant amount of money that has to be paid off from either the sale of the property or rents. I wish content creators would provide all disclosures with this maneuver

[dekonfrost]

The principal is sound. But you would need someone that knows enough to see the building ad it could be and do the fucking work you think you just hire a guy out if the book to just magically make your building worth an extra 50% . Without dealing with them on a daily basis on a multi hundred thousand dollar contract? Because its a small contract, to small to make it worth having an independent manager and they womt want to work with direct subcontractors or let you gc it which represents value and risk.

[vihangchaudhari]

But my question is that do banks give you another loan when you already have 1M loan???

[mylesmeikle]

wouldn’t the problem be then taking out a $1.5 million loan that you cannot pay back realistically? if you build a place for 1 million, You tell another bank that it’s worth 1.5, you didn’t make any money, in fact, you owe the new bank 500, 000… it’s good to lower your loan but realistically it’s not a good starting point

[PopPop-vx]

The tricky part is acquire 200k from friends and family.

[warnerlohse]

Wait....the cult followers at Jehovahs witnesses dont want you to know this?

[chickenandchips]

all of this is assuming that everything goes right….

[karthikrajar]

If its already giving a good cash flow on rent, why should I take another loan?

Rather than taking another loan on same equity,
I can repay my 1st loan and invest in other business/stocks for better returns?

[ninelaivz]

I think most people trying this will go bust.
The numbers are convenient for a short video but in reality this would be very hard to pull off. However anyone with the energy for it should try it.

[saibaba]

Hi, my doubt is how will I able to repay that 1million loan that I have taken from 2nd bank, even though I own the building, will that not count as my liability

[india]

People get overwhelmed by the big numbers understandable. This is how majority of wealthy become wealthy. Take it down to smaller scale even. Say someone buying a three family. Say they bought it in 1998 for $100, 000 and put down $10, 000 initially. Market prices back then just say mortgage is $2500. There are three units in the building all three bedrooms. Say even the first two floors were two bedrooms when you bought it then you turned them into 3 bedrooms. So now each unit gets $2800 talking 1998. So $ 2800 times 3. So the money you make comes in off that initial investment plus the rent. The owner has taken equity out 5 times between 1998 and now. Now the three family is worth $1.7 million. It would be in the city I’m speaking of. The going rate is now $1, 000 a bedroom this Location it could even be $4, 000 each unit. Think, what the profit is off that initial $10, 000 investment in 1998. Doesn’t even really matter how much the property was worth to begin with. The money’ you make is the rent coming in every month.Yes equity has been pulled to pay for other properties but has since been paid back. Now several properties all using same formula. It is practically impossible today not as many deals and too many people just overpaying trying to get it right. Done right that is what looks like.