Refinance, Don't Sell
Many people buy investment properties for both cashflow and the phenomenal
appreciation over the long-term. Monthly cashflow goes right into your pocket,
but what about appreciation? How do we get that money out?
There are a few options available:
- Sell the property - If you choose this option, you have
to pay a realtor to sell it, capital gains tax on any appreciation, and most
importantly you lose an asset that puts monthly cash into your pocket. This
is the least desirable option.
- Extract the equity - This means refinancing the property with your bank, adding an equity line of credit, or adding a second mortgage to the property. If you choose this option, there are no realtors to pay, the money is extracted tax-free (it's just a loan), and you get to keep the property.
As you can tell, the second option is our favorite. So what's the catch?
There can be some up front costs involved (e.g. legal fees, appraisals, mortgage
insurance premiums, etc.) and you must make sure the investment property can
support the higher monthly mortgage or loan payments.
This is our favorite method of reaping the benefits of our increased property
values, without having to sell. It has allowed us to purchase more properties
with no out-of-pocket expense!
You too can take advantage of appreciation when you invest with us in a Joint
Venture. If the property value increases and we refinance the property, most or
all of your original investment could be returned to you... all without selling
the property! You could even use your returned investment funds to buy another
property with us.
This article is copyright © 2004-2010 Spirepoint Properties. All rights reserved.
Paul Blacquiere and Joanne Beehler are full time real estate investors and have been investing in Ottawa, Ontario, Canada since 2002. They are owners of Spirepoint Properties, a Canadian real estate investing company dedicated to making real estate investing easy.
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