Monday, September 28, 2020

Is it Smart to Refinance Your Rental Properties Now?


There is a lot of media buzz going around about being the right time for refinancing, but is it the right time to refinance multiple properties? "The best time to refinance your rental property is when the value of the property is high and interest rates are low." There are other factors to consider.

Importance of Having Liquid Cash On Hand

Other than having actual cash in the bank, "liquid assets are things you own that can be quickly converted into cash without losing value."  Whether you own one or multiple rental properties, without full-time occupancy, expenses can quickly result in a negative return on investment. 

Impact of Economic Downturns 

As our country appears to be slowly recovering from the COVID-19 economic crisis, it's vital to understand how this impacts you as a real estate investor. 

  1. The Negative Impact on Cash On Hand
    1. You may have to lower rental prices.
    2. You may end up with vacancies or non-paying renters. 
  2. A Positive Impact from Cash On Hand
    1. There could be opportunities to acquire additional rental properties. 

Home Improvement Loans Should Figure into the Decision

If you're going to take advantage of refinancing a property, you may want to figure in cash for home improvements to increase the value of your property. While cash-out refinancing may be a good idea, it's an even better idea to understand all of your options to make the right decision for you and your properties. 

Considerations in Refinancing Multiple Properties at the Same Time

"Refinancing could be the best idea for some, but that doesn't mean it is ideal for everyone." By having one lender you trust to handle all of your properties, they can help you determine "if it is better to refinance the homes separately, or if it's better to refinance them all at the same time." 

With limits on the number of mortgages you can carry, you may be setting yourself up to miss out on acquiring new ones. Along with missed opportunities, there is more to factor into your decision-making. 

  1. "It may be better to pay down one loan more than the other in order to get the best rate and/or terms."
  2. "You will typically need a higher credit score than if you were financing just one home."
  3. You may also "need more equity when financing more than one property."

Interest rates should not be the only driving factor in refinancing your rental properties. With professional evaluation and guidance, you will have the information to determine when is the right time to refinance your properties, whether one, two, or all of them at the same time. 

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