Using the fix, re-finance and rent strategy greatly increases the return on investment (ROI) that can be achieved. The strategy is based on purchasing a fixer upper property and re-financing the property once the repairs are completed. This will allow you to withdraw funds towards the next property. By doing so you can maximize the number of properties that can be purchased.

Traditional lenders will allow you to borrow up to 80% of the property’s value. This means that you can re-finance the property after the repairs and get back 80% of the value added (know as forced appreciation) to the property. When set up properly this process can be achieved with very minimal cost. Often all that is required is the cost of an appraisal.

Determining your ROI is based on the funds you have invested in the property. Currently investors must put down a 20% deposit on a property purchase. For example, if the property was purchased at $250,000 the down payment would be $50,000.  Suppose that property produces an annual profit of $10,000.  Your ROI would be 20% on your down payment funds. If you used the fix, re-finance and rent strategy and you could withdraw $30,000 after repairs leaving you with $20,000 invested, that same $10,000 profit now becomes a ROI of 50%.

Brennan Property Investments can create an ROI greater then 100% per year without including forced or market appreciation.


This ROI chart for a real life example of a property owned by Brennan Property Investments.  
  

Not only is your ROI lower with the traditional way of investing but the money is stagnant while sitting in the property. True wealth is created when you have velocity with your money. By using the fix, re-finance and rent strategy you can move a large portion of your money into a new investment opportunity to build additional wealth. This strategy also allows you to gain greater profits and reduce future taxes. Since you don’t need to sell the property to reuse the funds for another property, the property will continue to appreciate increasing your overall profit. This will also avoid the fees associated with selling a property and should allow to have future profits from a sale treated as capital gains thus reducing your taxes payable when you dispose of the property.

Using the example of a property purchased for $250,000 with a combined cash flow profit and mortgage reduction amount of $10,000 and 5% market value appreciation per year, the difference with investing in the fix, re-finance and rent strategy can be substantial. By investing in two fixer uppers and re-financing you can create an additional $172,500 in profit during 5 years over the traditional way of investing. Just imagine the wealth that can be created by using this strategy several times.

To get more details or examples of past successful fix, re-finance and rent properties feel free to contact us.