Freeing money from your investment property

Freeing money from your investment property:

In 2008, when the real estate market experienced a fall out, a lot of people ran from investing in real estate. As is the case in any market turn around, there are those who seem to benefit from the event at the expense of those who don’t. You may be one of the smart investors who bought at the bottom of the market and are still sitting on those investments. If you are, then this may very well be an article for you.

By now, you are probably comfortable with the concept of equity. Equity is simply the difference between fair market value of a property and the amount of money owed on that property. So if your property has a fair market value of $1M and you owe $500K, then you have $500K equity.

While this sounds great – having your money tied up in one property may not be the most effective use for that equity. One way to “unlock” some of that equity could be through a refinance option. This would be done by taking out a new loan, for more that you currently owe, paying off your existing mortgage and then investing the balance of the cash into another investment property. This is called leverage – effectively where you use less of your money to acquire more properties, by borrowing more against (leveraging) the properties.

The upside is that you would be able to own more properties – this creates the possibility for you to experience and benefit from market appreciation. The down side is that your properties would be encumbered for longer periods of time, your payments would increase, and you might become more sensitive to the effects of any vacancy. Again, this decision should be made in accordance with your personal risk profile – you need to understand and be comfortable with the possible outcomes of any investment decision.

Watch this space for more value add articles from RESE Property Management LLC, if you have any questions or would like to have a chat about anything relating to real estate, please feel free to call the writer.
  Call Tony du Preez @ 801-360-6424 or email tony@resepm.com

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