How to Turn Equity Into Cashflow Without Debt

Last year, I bought this foreclosure to help pay for my daughter’s college education:

It’s a nice 3-bedroom home on a quiet tree lined street here in Ohio.

The purchase price was 49,500. After closing, I invested another 5,000 to get the home ready for showings and ended up renting it for $975 a month. The net annual positive cashflow after taxes and insurance is $7,800.

The actual market value of this home is around $95,000 leaving around $40,000 of equity.

As I was thinking about the velocity of money, I began listing different ideas I could use to turn this equity into additional cashflow and one of the ideas was to sell 50% of the home to another investor.

If I were to sell 50% of this asset to another investor, I would unlock around 40k of equity and would almost double the annual return from 14.3% to 26.9%.

I’d get back 73.4% of the purchase price very quickly. This would obviously reduce our risk with this asset. The risk on this property was already extremely low based upon the purchase price.

Even better, my new partner would enjoy a 9.75% hassle-free annual return. This would actually be hassle-free for them because I’d continue managing the home.

The idea would create 40k that I could use to buy new income-producing assets. My goal, if I were to do this, would be to generate more monthly cashflow than I sold to my partner.

I could do this by acquiring several manufactured homes. I could also do this by aquiring dividend stocks using the system highlighted above. I could even go buy another foreclosure and repeat this little system again.

I’m sharing this because you may have a similar opportunity with assets you already own. Could you sell part of one of your assets and use the equity to create more cashflow?

On a high-level, this approach is a lot safer than borrowing your equity – which is what I used to do before the 2008 real estate crash!