Refinance Rental Property - Don t Sell It
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Refinance Rental Property - Don’t Sell It
Summary
Thinking of selling your rental properties or apartment building? Before you do, consider the benefits of refinancing instead.---
Owning a rental property can feel like a long-term commitment without immediate rewards. But just because property values have increased and your mortgage is nearly paid off, doesn't mean selling is your best option.
The Downsides of Selling
Selling your property results in hefty capital gains taxes unless you reinvest through a 1031 exchange. Moreover, successful rentals can provide rising income as rents increase ?" a built-in, inflation-proof retirement plan. Why give that up?
The Case for Refinancing
Refinancing could be your ticket to accessing the equity without incurring taxes. Since borrowing is not a taxable event, you can utilize the money however you wish while retaining ownership of your properties.
Consider This Example
Imagine you've owned a small apartment building bought for $240,000 with a $40,000 down payment and $1,650 monthly mortgage payments. Today, it’s worth $400,000, with only $120,000 left on the mortgage and an $800 monthly cash flow. How do you access your equity here?
A bank might loan you 70% of the property's value, resulting in $280,000. After settling the original mortgage, you're left with $160,000. Thanks to current low-interest rates, your new mortgage payments would be similar, only reducing cash flow by around $50 monthly.
Even better, investing $40,000 in property upgrades like carports or laundry rooms could justify higher rents. This strategy leaves you with $120,000 to spend freely and likely increases your cash flow.
Doesn’t retaining a stable, income-generating asset sound more appealing than selling? Refinance your rental property instead!
You can find the original non-AI version of this article here: Refinance Rental Property - Don t Sell It.
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