Equity building is a style of real estate rehabbing for income property. It requires far more funding and involvement than a normal rehab and frequently the investor holds the property instead of selling. The advantage is holding income property with a ROI that could not be otherwise obtained. A trusted legal advisor can assist in structuring the LLC or Corporation that will own the property, forming an agreement with partners and investors to secure funds, and putting together a secure loan package that will protect your investors. While time consuming, establishing a clear investment structure early in the process will prevent difficulties down the road. We want every closing experience to be positive and profitable for all parties.
8 unit apartment building, vacant, and needing significant work.
Asking Price: $300,000
Rehab Needed: $300,000
Total Investment: $600,000
Rental Income Per Unit: $1,100
Total Gross Yearly Income: $105,600
Total Yearly Expenses: $35,000
Total Net Yearly Income: $70,600
Investors have a hard time finding income property with an almost 12% return on investment, but by doing a rehab of income property, the investor has been able to create his or her own equity. After a year of income flowing through the building, the investor can obtain conventional financing and pull money back out of the property to be used on a new project. In our example, the property netting $70,600 a year could appraise for over $700,000. You've gained equity while building double digit rental income.
Due to the amount of cash flowing through the rehab, this area of investment has a tendency to attract fraudulent activity. Investors need to have trusted advisors to guide them through the process and provide over sight at every step. Individuals interested in this area of investment should contact our office.