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Pinpointing The Optimal Moment To Refinance Your Investment Property

When is the ideal time to refinance your investment properties?

Whether it is to optimize cash flow and real returns, or to access more capital to strengthen cash reserves or expand and scale with new opportunities, these are indicators of smart moments to refi single and multifamily investments.

Values & Equity Are Up

When property values have been soaring and you have a significant amount of equity in your real estate assets it can be a wise time to refinance.

No one knows exactly when markets will peak. It is far easier to obtain mortgage financing when you have substantial equity, and markets are rising versus considered declining markets. Lenders are more excited about lending, their risk seems lower, and the process and terms are better for borrowers.

It is also important for investors to be regularly evaluating their true current cap rates. Large amounts of equity mean that your actual returns right now may be much lower than you thought. That idle equity can be put to work in more profitable deals through a bridge loan or cash out refinance.

While sitting on large paper gains can feel good, we all know that it can change at any moment. Missing out on this moment to refi can mean those gains and equity levels can be vaporized pretty quickly and for years before it bounces back. Just like investing in stocks or cryptocurrency, it may be wiser to cash out some of those gains and protect them while you can.

Interest Rates Are Good, But Could Rise

Interest rates may not be that impactful on short term flips or during sprints to reposition properties. Though for those who plan to hold, just a couple percentage points can make a passive difference in cash flow, valuation, access to funds, and the overall cost of financing and assets over the long term.

If you plan to buckle down and hold an asset, and there are chances rates could rise in the near future, it may be wise to lock those in while you can.

Look at historical rate sheets and note that they have often been in the high single digits or double digits for years. If there is a chance you may need to refinance in the next few years, it may not be worth gambling on rate fluctuations making leverage cheaper.

There Are Better Returns To Be Found In New Deals

It’s basic math. If you can recapitalize with refinancing to free up your equity at sub 6% rates, and can put that money to work for 12% or better returns, it’s a no brainer.

The Financing Process Is Palatable

During some periods borrowing can be very unattractive. When values are declining, lenders are resistant to take risks, and new regulations make it more complicated to borrow, many just don’t want to go through the mortgage process. When you can find access to simplified borrowing, from a lender who wants to put working capital in your hands it’s worth taking advantage of that while things are good.

You’ve Added Value Or Improved Performance

If you’ve recently completed renovations, or have released a building and now have a track record of good performance, you will have bolstered the value of your assets and may benefit from drawing on that new bank of capital you created to expand and do more deals while things are good.

Check out SolveMyLoan.com’s easy financing process bridge loans and refinancing options for investment properties today...

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