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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
Tips for Refinancing Rental Property
What if you already own rental properties and you have equity in those rental properties and you want to refinance them and pull out some money and buy more properties.
The question is what is the most effective way of doing that? What kind of financing is the best? and is there anything that you need to be aware of while in the process?
In this post, we will take a look at the complete guide for refinancing rental property in Texas.
Planning
If you are into the real estate business and want to build a proper real estate profile you need to make sure that it is well planned.
You want to make sure that you work your way backward and decide on the number of rental properties that you want to own which can generate income that manages finances for your lifestyle.
Like if you have 10 properties that are paid off, and each one produces a net income of five hundred dollars a month, for 10 properties that would be five thousand dollars a month and sixty thousand dollars per year.
That is how you plan your future goals ensuring that it covers your living expenses.
The thing that you need to analyze is how close are you to achieving that number of properties, even if they are not paid off are they producing enough income to cover your living expenses.
So if you are planning to refinance rental property because you want to reach that number you are in the growth phase where you are trying to acquire more rental properties.
Refinancing Strategy
Every time you are refinancing rental property in the stage where you are planning to achieve the number of rental property ownership, you might want to give yourself as much flexibility in the future because you just don’t know what’s going to happen.
If you can get 30 years fixed conventional mortgage on individual properties, you want the safest and longest mortgage term possible to give yourself more flexibility going forward.
Challenges
As you get more properties the refinancing gets more challenging because it adds up to your debt to income ratio which is one of the crucial factors qualifying you for a refinance.
However, if you have a solid income, good credit, and enough reserves, you should be able to get those mortgages. The maximum number of investment or rental properties one can have thru a conventional mortgage is 10 properties.
After 10 properties you may have to look for some other loan products like private mortgages from other investors, hard money loans, commercial mortgages, etc.
Other sources may not have flexible terms compared to conventional mortgages.
Conclusion
Let’s say you are planning to achieve 10 rental properties goal and if you get seven or eight traditional mortgages.
At this stage instead of growing you can use all your cash flow to start paying your rental properties.
Once you pay off a few of these properties you can refinance rental properties again to start buying more, using the traditional mortgages.
