Home equity is the difference between the balance of your home mortgage and the current market value of your home. If you are fortunate enough to have equity in your home, using it to invest in real estate is something you may want to consider.
Throughout history, many people have made outstanding investments in real estate. Many have even made fortunes. This is not unique to our country and it has occurred throughout the world, generation after generation. But there are many things you must take into consideration when you are thinking of doing the same.
In previous articles I have mentioned that you need to be smart with the equity in your home. In fact, there are many advantages to paying off your mortgages on your home and investment properties, particularly when you are planning for and reaching retirement age. In a future article, I will talk about paying off your mortgage and ways to expedite doing that. But for now, if you have equity in your home and feel comfortable using it, there is no better way than to invest it in real estate.
First, you want to speak with a representative at a bank, credit union or a mortgage broker to get pre-qualified and to learn about your options for refinancing and using the equity in your home. Mortgage interest rates are so incredibly low it is very affordable to borrow money right now. And with housing prices down, it is a fantastic time to buy property. After you have been pre-qualified and want to move forward, you can then refinance your home and pull money out of it for a down payment on an investment property. I never recommend that anyone ever overextend themselves financially. So if you are going to do this, please make sure that you feel comfortable with it.
Prices are significantly down from five years ago and mortgage interest rates continue to be historically low. So this is a great time to buy.
If your budget allows, you can consider anything from a single detached home to a multi-unit rental property. Whatever you buy, you want to make sure that there are recent comparable sales in the immediate area of properties that are as “apples to apples” as possible so that the comparable sales are consistent with the offer amount you are agreeing to buy the property for. To assist you with the process, you will want to work with a seasoned realtor to guide you through each step. One of the most wonderful things about buying a property is that you do not pay for the services and commission of your buyer agent. It is customary that the seller pay for the commissions for both the broker of the seller and the broker for the buyer.
Property management companies typically charge about ten percent of the gross income of the property. But keep in mind, this fee can be negotiable and also tax deductible. There are also different levels of service that property management companies offer from full service to a select service. There are many advantages for having a property manager look after your income property, so it is something you can consider, if it works within your budget.
Using your home equity for investing in real estate is something you can consider, particularly now when it is a buyer’s market.
Trent St. Louis is a licensed Real Estate Agent and a member of the National, California and San Diego Associations of Realtors. You can reach Trent at The Metropolitan Group at 619-300-1621 or at SpecialAgentTrent@gmail.com CADRE#01273643.
