Investment properties are an excellent method through which to earn extra income. In some instances, in fact, it is a person’s main source of income. Buying properties and renting them to tenants helps some people meet their long term financial goals. But conditions can change along the way. Maybe the cash flow starts to get tight for the investment property owner. Perhaps the owner’s expenses have increased, but rents have not.
When the cash flow gets difficult, it may be time to consider an investment property refinance. In some cases, the property owner can refinance quite advantageously, resulting in smaller monthly payments with quite a bit of the loan proceeds still available for the owner’s use.
The smart investment property owner uses that excess cash to make improvements to their rental property units. They might apply a new coat of paint or install some new appliances. Maybe it is time for an upgrade of sinks and faucets or new carpet and tile for the floors. Whatever the improvements may be, they are a great reason for raising rents a fraction or two.
Now with the lower payments to the lien holder afforded by the investment property refinance and the higher rents being charged, the property owner has greatly improved their cash flow. Maybe they will be able to pay off the mortgage on some of their properties earlier. Once mortgages are paid, the property owner has even further cash flow available. They might purchase additional properties or decide to invest the money in some other way. Their financial future is looking brighter every day!
Investment property can be a huge asset to the owner. If they take the time to maintain their properties and utilize cash flow to make improvements along the way, they will always have good reasons to make reasonable rent increases. As mortgages get paid off, their cash flow will also increase. An investment property refinance can totally change the property owner’s standard of living.
As the property owner pays down the refinance loan, their equity in the property continues to increase. If the property value also rises, so too does the owner’s equity. In a few years, they may be ready to capitalize on their return by acquiring another investment property refinance to begin the cycle again. This can be a great strategy for early retirement and a continuous string of income throughout the owner’s lifetime.