Hi everyone, another aspect I`m not sure has been mentioned, if you have equity in a home, you could sell the home, and rent, cash goes much further than equity.
If you had $100,000 cash for instance from a sale you could go out and easily buy 8 to 10 properties tommorrow which are cash flow positive in some regional areas. Using equity would not get you nearly as many.Hi Markpatrick,
thats also true, but lets say, if you were able to purchase properties at 105% finance and the property is still +ve cashflow on that arrangment. Then redrawing equity as a cash deposit (even if you have 100k equity availabe), to finance properties in this manner, would be better than using a $100,000.00 as your tying up cash money, rather than when you can use the banks money and still have your property, than having to sell it to have more funds.
cheers,
s.i.sYou are assuming a lot who says the property will appreciate in value and without even any renovation?, this method could realistically take twenty years and even then you might make nothing, who knows. You can say who cares I am CF+ but is it worth the effort at all if it`s a pittance for all your risk and you have to spend all your efforts on it, you can`t just buy property this way and forget about it.
It all depends on the market but my thought is that it is better to own ten outright than fifty or however many with a big mortgage, I think it is better to own houses as a way to store your money and get out of the cycle, sooner or later you must buy and hold but my strategy for getting there is different than most.
I would prefer to hold only when I own the property. I`m still learning too but I don`t buy and hold longterm in the meantime so my money is never tied up to long, it all comes down to time.
I see buying many homes, using high equity particularly right now as too risky, what happens if you lose money on twenty properties or can`t rent some or a hundred other problems?, besides this would become a full time job real quick, just finding good deals etc etc.
At the end of the day I hate dealing with banks and don`t like to think of myself as a landlord and with the way I do things now I see some results for my efforts. I take before and after pics of all my houses I enjoy the process.Also I have met many landlords throughout my years in the painting business and it is only a select few that would recommend it, most lost big dollars and had to slave for years to do it!.
Hi Markpatrick,
Problem with selling a property is, your encur to many fees and charges just to sell the property and then you are taxed on the profits made. Ideally this might be good if you need to liquidate and you need a quick cash injection, but redrawing equity from a property, avoids you from having to sell your property but also you dont pay tax on equity redrawn, which is a major advantage.
You can still invest that redrawn equity into new investments and capitalise on them, and still avoid selling them too at the same time.
cheers,
s.i.sI see many property investors say they buy and hold unless a property does not “fit in with their profit expectations” etc. I think if we have a property that is not “performing” to the level that we want/need/plan for, then we kill it off so that we can use that money to chuck in to something else.
Remember how much we first knew when we bought that first IP? As for me, I’ve learned much since those days. As we learn, we might choose to change strategies. A non-performer can make us go backwards, and not forwards. A rural property in poor nick that needs restumping might be better off sold to someone else- a reno-type, so that we can buy another place with less problems than the first.
kay henry
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