EQUITY FUNDING
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 don’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!
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 don’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.
