When you acquire rundown real estate – then move in quickly and do the fix-up. You add immediate value! I often refer to myself as an ADDING VALUE SPECIALIST. When you buy in cheap and quickly add value, — you increase your equity much faster than waiting for appreciation or natural cause’s to do it for you. Fixer specialists force their equity growth… they don’t wait for it to happen. Buying at substantial discounts, then quickly making improvements is by far the fastest equity builder in the business and don’t forget it.
For fix-up investors, newly created equity (after fix-up) is a prime source for quick cash. Every investor I’ve ever met needs cash. House fixers are well aware that fixin’ houses for yourself doesn’t provide a paycheck on Friday night like traditional W-2 jobs. Quite often, house fix-up investors must rely on their newly created equity for grocery store money. After fix-up – it’s fairly easy to obtain a new loan or another loan to pullout all your cash, which includes the down payment and fix-up funds. In the strict sense ~ borrowing has little to do with profit making: It has more to do with increasing your debt. However, it facilitates your forward movement to make profits! Without cash you cannot move forward therefore, your investing would be stopped. Also, your overloaded credit cards will likely need relief.
Many start-out investors must rely on their current fix-up job profits in order to acquire their next project. This is very common! Borrowing for a down payment or to payoff rehab debt makes good sense. What doesn’t make good sense and often happens – Investors will borrow the maximum amount they can. All the funds don’t get used for business – But even worse, the payment on the new borrowing turns the property into an alligator. That’s very bad, don’t do it!