Six Ways Under Your Nose To Finance Your Home Based Business
Men Women and Their Finances
Is Now A Good Time To Refinance Your Home Loan
Six Ways Under Your Nose To Finance Your Home Business
Making Money in Equity Finance
1st And 2nd Mortgage Refinance Loan Consolidate 1st And 2nd Mortgages Into One Low Payment
Finding the Best Mortgage Refinance Rate
Refinance Your Mortgage You Could Save Thousands Or More Dollars Over Time
Organize Your Finances Thinking Outside The Shoe Box
Mortgage Refinance After Bankruptcy
Refinance Rental Property Don t Sell It
Secured Loans Affordable Finance Options For Homeowners
UK Finance from Venture Capitalists
Personal Finance Student Loans Debts Do Not Go On Your Credit Record
Credit Report Scores Why it is important for your finances
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Rental Property - Refinance, Don't Sell
You own a rental property for years, and never see the "big pay-off." Is it time to cash in on your investment, now that you've paid down the mortgage, and values are up? Maybe not.
The Problem With Selling
Selling means you'll have to pay a large capital gains tax. This can be avoided if you reinvest through a 1031 exchange, but then the point is that you want your money, right? Also, a good rental gets more income as rents go up. Do you want to lose this inflation-indexed retirement plan? What's the alternative?
Refinancing Rental Property
Have you considered that if you refinance, you can get much of your gain out of the property, without paying a penny in taxes? Borrowing money is not a taxable event. You can take it and spend it however you want, and still keep your rentals.
Let's look at an example. Suppose you have owned a small apartment building for years. You bought it for $240,000, with a downpayment of $40,000, and mortgage payments of $1650 monthly on the balance. Now it is worth $400,000, you only owe $120,000, and your cash flow is around $800/month. How do you get at that equity?
A bank will probably loan you 70% of the value, or $280,000. After paying off the first mortgage, you are left with $160,000. With todays lower interest rates, your payment on the new mortgage will be about the same. At most you might lose $50/month in cash flow.
An even better scenario: Use $40,000 for high-return upgrades to the property, such as carports or laundry rooms, and then raise the rents. You could have $120,000 left over to spend any way you want, AND have higher cash flow. Does that sound better than selling your retirement plan? Don't sell. Refinance that rental property!
About the Author
Steve Gillman has invested real estate for years. To learn more, and to see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
Steve Gillman
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