The Real Estate Investing Authority®

How To Know When It's Time To Sell Or Refinance Your Rental Property.

CASH IN ON YOUR PROPERTY’S EQUITY BEFORE IT’S TOO LATE!!!

DISCLAIMER: Usually when companies or people urge you to hurry or create a sense of urgency, they’re using dishonest salesmanship. Nexus doesn’t operate that way and we think it says a lot about the principles and values of that company when they try to gimmick people into action. However, in this case, please note that we are not trying to sell anything or benefit from expressing a time crunch, but instead are sharing our thoughts for the benefit of the reader. In our opinion, the writing is on the wall that change to the real estate market is coming soon and we want our clients and readers to be fully informed.

 

 

NEXUS’ APPROACH TO REAL ESTATE INVESTMENT 101:

So many of our clients, and employees, have benefited from a pretty straightforward approach to real estate investment: Buy a multi-family property, improve and maintain the living conditions to increase potential rent, let equity build for a couple years, refinance and pull that equity from the house in cash, buy another multi-family property with that cash, and repeat.

 

[ Learn More: A CLOSER LOOK AT THAT PROCESS BY DIVING INTO THE NUMBERS ]

 

That was the playbook before the market took off and it will continue to be the playbook well after, but it looks like things might begin to get a bit trickier. Property values are so high right now and they got there so quickly that it appears banks are going to pull back. Here’s what you can expect:

 

[ Learn More: WHY IT TAKES SO LONG TO CLOSE ON A RENTAL PROPERTY ]

 

Nvest

LIKELY NEXT STEPS BY LENDERS:

Historically, real estate tends to cycle in decades. Every ten years or so you can expect a pop, a burst, a significant redirection. It’s been over a decade since the 2008 Housing Bubble burst.  Prosperity has returned to the real estate market…potentially too much…so we’re due. Here are just a couple moves U.S. lenders could take to try to limit the impact of the expected market change:

 

  1. RESTRICT CASH OUT REFINANCES

The idea of stopping cash out refinancing altogether is being entertained by banks. Banks know that the property values are extremely inflated and that they’re going to come back down. They know people are cashing out and pulling real money on value that won’t exist in 6-12-18 months.

 

  1. INCREASE DOWN PAYMENT REQUIREMENTS:  

Several years ago, pre-Covid and before changes in supply and demand led to the surge in housing prices, banks were asking for a downpayment of just 20%. If you think back to the Nexus 101 approach above, you could buy a $300,000 home for just $60,000. Once the market took off, that 20% went up to 25% and it's been there ever since. Using the same example, you now need $75,000 in your pocket to buy the same property.

 

There’s a very good chance that lenders will raise that requirement to 30% in the near future, hence the urgency. The home that would’ve cost you $60,000 three years ago is soon going to cost you $90,000. A much smaller amount of people are going to be able to afford to buy, which will lead to lower demand, and real estate values will come down accordingly.

 

[ Learn More: HOW TO ACHIEVE FINANCIAL INDEPENDENCE AND RETIRE EARLY ]

 

nvest

 

THE OTHER BIG PIECE OF THE PUZZLE: INTEREST RATES

It’s all but certain interest rates are going to rise this year in response to recent inflation and tight labor conditions. Goldman Sachs recently stated that they expect there to be four rate hikes in 2022. What does this mean for real estate investment? Expect this to trigger another decrease in demand as another variable makes buying less affordable. At Nexus, we cater to all types of investors, but most of our clients are typical blue collar folks looking to take advantage of opportunities in real estate by buying one, maybe two properties. For many of these people, they’re likely to get squeezed out of the market pretty soon…unless they capitalize by grabbing their equity sooner than later.

 

[ Learn More: NEXUS’ MODEL WORKS FOR BOTH MAIN STREET AND WALL STREET INVESTORS ]

 

CONCLUSION AND ACTION STEPS:

In the first half of last year, $1.6 trillion in loans were refinanced. That was a 33% jump from the previous year, but that draw will decrease as record low interest rates climb in 2022 and lenders look at ways to protect themselves against inflated value. If you have equity built up in your property, Nexus strongly recommends that you consider taking it out as cash before banks start making it harder, or less lucrative, to do so. There are other options as well, such as taking an equity line of credit or even selling. Our recommendation is that you put some thought toward trying to capitalize while the opportunity still exists.

 

Still have questions? With over 1100 units under management and franchises available nationwide, we pride ourselves on being the Real Estate Investment Authority®. Nexus was named the largest residential and commercial property management company in Southern New England and we look forward to helping clients and curious investors alike. Contact our team today

 

WHAT OTHER PEOPLE ARE READING:

1.What To Do As A Landlord If Tenants Are Doing Drugs

2.The Best Strategies For Handling Tenant Parking Disputes

3.Why It Takes So Long To Close On A Rental Property

 

[ Learn More: Last Month’s Property Management Articles ]

 

  Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.

 

Your Property, MANAGED®

The Real Estate Investing Authority®

Connecting You To Better Living®

 

You Could Own A Nexus Property Management® Office For Less Than You Think!

 

Property Management Franchise Opportunity

Fall River MA Property Management Office

Worcester MA Property Management Office

Pawtucket RI Property Management Office

Natick MA Property Management Office

 

Add new comment

Nexus Feedback

Absolutely the right property management company to have looking over your residency. They are reliable, professional, friendly and all the workers I have met seem to be willing to go the extra mile and do anything asked of them. Never before have I had such trust in a company in knowing when a problem on the property occurs that priority would be made to have a tech arrive and handle the issues as soon as possible. I recommend Seth Benson's work to all of my friends and family.

10 Jan 2020

After months of defeat searching on Craigslist, I decided to go to Nexus. I was greeted openly and welcomingly by Mikalai. Finally, I had found someone who seemed eager to help! When I arrived I was very discouraged having had zero luck in the previous 5 months. His confidence and reassurance that he would find a perfect fit for my son and I gave me my hope back. From the beginning, he never made me feel like I was a hassle or an inconvenience. He immediately started going through listings with me on the computer and had me viewing apartments. I had spoken with many realtors and their responses, or lack thereof, were very delayed and not very helpful. Mikalai made me feel like a priority with his prompt responses and motivation to get me into the right apartment quickly. After just DAYS of looking Mikalai was able to get me into the perfect place for us. He has just been fantastic to work with and has been such a huge help!! Thank you Mikalai and Nexus!

31 Jul 2018

If I could go lower than 1 star I would ... This place is a scam please do yourself a favor and stay away..oh and 9/10 of theses "good reviews" are from people they pay to post them .. because they offered my sister $50 off her rent if she made different emails and wrote nice things about them ..they are shady a.f and unprofessional .

04 Dec 2020
Response from the owner:

You caught us Jay! We are out to scam all tenants and owners! Considering our landlord clients would not respond positively to rent discounts or credits being given out for the benefit of Nexus, logically the owners who would be losing $50 in rent revenue in your theory would end up leaving a negative review as they would be victims of theft. The math does not add up here. We appreciate your high opinion of our success.