Refinancing a rental property is a good idea when property value grows. Even still, there are several options that a landlord may wish to take, each with their own benefits and drawbacks. As borrowers will soon see, a remortgage can be even more profitable than selling the property outright.
Let's say that you buy a property that costs an easy $100,000 with a mortgage you obtained. Over the next ten years, the housing market in your area becomes highly competitive as new people arrive and set up shop. Because of such events, the value of the property shoots straight up to $200,000- double the current value in which you invested in. You are now thinking of selling it for a quick lump sum- but is it the best idea?
Selling the property outright is actually a poor idea, depending on whether or not you desperately need the money or not. The extra money received as profit will be heavily taxed, meaning most of the increase in worth will go straight to the government. Obviously, not too many people like this option, considering there are more efficient means of keeping their wealth despite government interference.
Sometimes it isn't about how much money you have, but what you own and can refer to as equity. You could sit back, relax, and just watch the money come in each month, but this too is a poor decision, Instead, consider obtaining a rental property refinance. This will allow you to further extend your "reach" in real estate and increase your overall wealth.
A rental property refinance will take a current rental property and borrow against it. Previously, you bought the property- and the value increased in double. This means you are eligible for another mortgage if you have shown a good track record in maintaining payments. This money can be used to buy more property in the area and to rent it out- so as to expand your empire and still keep your net worth building up.
There are instances where selling a property outright is a good solution. If you have dire need of the funds, don't be afraid to do so. But if you are trying to get your portfolio larger and more successful, the bet idea is to opt for the rental refinance option that lenders are offering now. Do realize, however, that this may increase risk of defaulting on a loan should something go wrong.
Closing Comments
There are plenty of lenders to choose from if you don't have one in mind already. If you've proven your worth to your current lender, you may wish to go back and ask about what they offer in terms of rental property refinancing.
Let's say that you buy a property that costs an easy $100,000 with a mortgage you obtained. Over the next ten years, the housing market in your area becomes highly competitive as new people arrive and set up shop. Because of such events, the value of the property shoots straight up to $200,000- double the current value in which you invested in. You are now thinking of selling it for a quick lump sum- but is it the best idea?
Selling the property outright is actually a poor idea, depending on whether or not you desperately need the money or not. The extra money received as profit will be heavily taxed, meaning most of the increase in worth will go straight to the government. Obviously, not too many people like this option, considering there are more efficient means of keeping their wealth despite government interference.
Sometimes it isn't about how much money you have, but what you own and can refer to as equity. You could sit back, relax, and just watch the money come in each month, but this too is a poor decision, Instead, consider obtaining a rental property refinance. This will allow you to further extend your "reach" in real estate and increase your overall wealth.
A rental property refinance will take a current rental property and borrow against it. Previously, you bought the property- and the value increased in double. This means you are eligible for another mortgage if you have shown a good track record in maintaining payments. This money can be used to buy more property in the area and to rent it out- so as to expand your empire and still keep your net worth building up.
There are instances where selling a property outright is a good solution. If you have dire need of the funds, don't be afraid to do so. But if you are trying to get your portfolio larger and more successful, the bet idea is to opt for the rental refinance option that lenders are offering now. Do realize, however, that this may increase risk of defaulting on a loan should something go wrong.
Closing Comments
There are plenty of lenders to choose from if you don't have one in mind already. If you've proven your worth to your current lender, you may wish to go back and ask about what they offer in terms of rental property refinancing.
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