Isaac Toussie: Make Money On Your Property Without Selling It
Isaac Toussie, a professional real estate developer of several years’ experience, in this article will share his personal insights and opinions. Just bear in mind, as always, that your mileage may vary so be sure to consult all the necessary qualified people before you make any business decisions of consequence, people like lawyers and accountants. What follows is being presented solely for human interest purposes and should not be misconstrued as advice of any kind whatsoever!
Now, if you have a significant amount of equity in the property that you own, you may very well be able to take all that money out while keeping your property. There are three ways of doing so which are very popular because they can work out quite nicely. The first method is to simply take out a second mortgage on your property. Let’s say that you had bought the property five years ago at a hundred thousand dollars, with eighty thousand of that in mortgage. Your equity would be twenty thousand. If the property today is worth a hundred and thirty thousand dollars, and your mortgage was paid down to seventy-five thousand, your equity would now be fifty-five thousand.
Suppose you then borrow thirty thousand dollars from a private lender. Your total debt on the property would become a hundred and five thousand dollars, a debt-to-equity ratio of eight-one percent, which is rather reasonable (you don’t ever want to go over ninety, however, just to be on the safe side).
Another way people use to make money on their property is to use it as collateral to secure a line of credit from a bank or local savings and loan association. To continue with our example above, your equity of fifty-five thousand dollars may be able to get as much as thirty-thousand dollars in credit, with no interest costs until you actually use the money – and even then, the interest rates would be quite attractive.
Finally, you can try installing a rent-to-own tenant on the premises of your property. A rent-to-own program allows someone with the desire to purchase some twelve to twenty-four months to fix their credit so that they can cash their mortgage and cash you out. The renter will usually pay you anywhere from three to ten percent of the value of your property upfront in the form of a non-refundable deposit. This money is thousands, or even tens of thousands, of dollars – cash – in your pocket…and if the tenant does not follow through with a purchase, you keep the deposit and start the whole thing all over again!