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How to Reinvest Equity from Your Home in a Low-Risk Way

Many homeowners in the neighborhood are sitting on a lot of dormant equity because home values rose by 30% in the last few years. Imagine having a prudent way to conservatively deploy that capital to generate income and create more equity growth. Buying a relatively low-priced investment property is a great way to start generating passive income, build future wealth, and gain tax advantages while minimizing the risk. How could that possibly work?

The first step is finding a market with relatively low-priced homes that command enough rent to create positive cash flow. I recently connected with a Realtor who does a lot of business in Ohio. He consistently sees properties in the $100,000 range that rent for $800 to $1,000 per month. That’s a way better price-to-rent ratio than a $750,000 house in Glendora that rents for $3,200 a month. At a $100,000 price, you could buy a viable investment property with just $25,000 down rather than $187,500 down. To avoid refinancing at a high interest rate, you could use a home-equity line of credit (HELOC) to liquify some of your equity while keeping your existing, low-rate mortgage

The HELOC route has several advantages: 1) The money is available to you, but you don’t have to use it right away. 2) You don’t make payments on the HELOC until you start using it. That means if you qualify for a $150,000 HELOC, you could use $30,000 of it for the down payment and closing costs on an investment property. 3) It gives you a safety net to weather financial storms that might otherwise force you to sell at a bad time.

Many people fear investing in property they can’t personally manage. However, a skilled, trustworthy property manager will help you keep good tenants in your property, collect rent, coordinate repairs, and conduct maintenance inspections for you. This allows you to keep track of what’s happening with your property and make decisions about the moving parts without having to physically be there.

If you’d like to explore this possibility, give me a call or shoot me a text at 626-328-4199. I’d be glad to chat with you about it!

Interested? let’s talk

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