The whole world is “not in Kansas anymore!” The tornado of the current economy is shaking up everything and real estate owners are asking if refinancing rental properties for the tax deductions is a must for 2022?
Refinancing rental properties is always something that an investor can do when the numbers and the strategy make sense. It isn’t as simple as the rates have decreased therefore refinancing rental properties is a no-brainer decision. There are serious considerations, and calculations that need to be made before an investor makes a devastating choice in a panic. In many markets, the pandemic has caused incredible increases in value for single-family homes, inspiring people to consider refinancing rental properties along with personal homes. But is this the right move, right now?
Adiel Gorel, Owner of International Capital Group will be hosting the live zoom event to find out the best places to invest in real estate in 2022.
Adiel Gorel states, “The biggest market boom was Phoenix, AZ. metro area. During nearly two years of the pandemic, the prices of those homes went up by over 50%!”
Not every gold rush yields gold especially for those looking to get rich quick quick quick. Nearly 4.3 million people quit long-held jobs in January of 2022, so many investors are focusing solely on refinancing rental properties to accommodate this surge of people moving into apartments. Refinancing a current rental property can be a savvy move, as the rates have likely lowered since the original purchase, especially because refinancing rental properties means tax-free cash.
Tax-free cash sounds great and it can be if the strategy of reinvestment is great as well. The heart and soul of investing, especially in single-family home rentals, is the 30-year fixed-rate loan because that loan never changes despite inflation and rising costs of living. Once an investor buys one and feels the power of that 30-year fixed-rate working they see it makes inflation a friend and inevitably an investor will buy more than just one rental property. Inflation will continue to erode the real value of a fixed-rate loan day after day, while the tenant is paying off the mortgage.
Taking it a step further, if the interest rate on the old loan is higher than it is now, it’s possible to refinance a rental property to a much lower rate. Here’s where the tax-free money comes into play: investors can pull out cash to put as a downpayment on a new rental property tax-free. That would be an example of where it’s very savvy to be refinancing rental properties. This impactful strategy can be put into play for those who understand how to leverage tax-free cash.
Adiel Gorel, owner of the International Capital Group which has helped thousands enact this strategy, explains that the big news when refinancing rental properties may not be worth it unless the rate improves by at least 1.5%, and preferably 2% or more. Always do the calculations however, don’t forget the massive benefits of being a long-term investor. With a single-family home in the sunshine states at a 30-year fixed rate many investors wisely choose to do the hardest thing to do in real estate, Nothing! Many investors simply let these loans pay for themselves over the course of years… and rates will always fluctuate while holding a 30-year fixed-rate loan. Keep in mind that when refinancing rental properties, less than 1.5% improvement is usually not worth it. All of this and more is what Adiel Gorel shares in his free virtual events every quarter.
Here’s the needle mover, to successfully refinancing rental properties. When the amount of cash an investor can pull out is significant, especially when this amount is significant enough that it can be used as a downpayment to buy two or three more investment homes it’s a needle mover. A great strategy is to increase the number of homes from one to three or four and get a loan at a very good rate for them during this time with the cash that’s been pulled out. That’s a situation where refinancing rental properties can make a significant contribution to family wealth and serious financial security in the long run. Right now during the pandemic, the interest rates are essentially still the lowest rates in the history of all time, which is another reason why a 30-year fixed-rate loan is a very good idea and why this has investors scrambling to ride this economic wave to gain the benefit. It’s all about understanding the strategy behind refinancing rental properties before calling up the bank. Remember the bank has its goals as a lender and they aren’t the same goals as the borrower. Education is key to coming through the pandemic smarter, safer, and wealthier.
Visit ICGRE.com/guide to find out the best places to invest in real estate in 2022. Get details about rental properties tax deductions today. Many people don’t know how rental income is taxed and are surprised by the answer. Being surprised is not a strategy, getting answers, can mean a huge difference to the bottom line.
ALLUSA INVESTMENTS, INC
ALLUSA INVESTMENTS, INC
165 North Redwood Drive, Suite #250
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Boston New Times journalist was involved in the writing and production of this article.