Leveraging equity in your existing home is often the simplest and least expensive option when buying a second home, according to Valuepenguin.com, the financial website known to recommend choices selected by full-time analysists and staff writers. According to Valuepenguin.com, tapping into home equity instead of your standing assets allows you to fund home purchases at a discounted rate while your property and remaining assets continue to appreciate in value. You achieve a lower interest rate than with a personal loan, and you don't have to divert money from existing investments. Home equity financing allows you to tap into a part of your net worth that is otherwise difficult to utilize.
Leveraging works like this, explains homeunion.com: Buy a $50,000 investment property with all the cash you have on hand. This equals a 0% leverage. Buy a $100,000 investment property with the $50,000 cash you have on hand and borrow the remaining $50,000. This equals a 50% leverage.
Radio.realtor reports that the NATIONAL ASSOCIATION OF REALTORS® Buyers and Sellers Guide states that a typical seller of a home after eight years saw a median gain in equity of 24 percent. But if that same seller waited up to 15 years, they would enjoy a 40 percent increase in equity. The message is clear. The longer you hold on to your property, the more money you stand to gain.
Income from rental properties is a source of passive income. Tenants pay rent. The rent is used to pay the costs of operating the property from monthly mortgage to utilities to taxes and more. If the rent is not enough to cover the costs of maintaining the property, the owner will need to use cash on hand. If something major breaks, the owner will need cash on hand or an ability to access credit to finance the repair.
The U.S. rental market is booming, reports mysmartmove.com. Rental households are growing at a faster rate than owner households. Millennials are staying in the rental market through their 20s and mid-30s and increasing numbers of baby boomers are selling their homes and electing to rent.
The Denver Business Journal reported in February 2017 that Denver-Aurora ranks 128th out of the 400 largest cities in the U.S. for people who rent rather than own. Online rental marketplace Abodo.com analyzed data from the U.S. Census Bureau's 2015 American Community Survey in cities with populations of more than 100,000.
Among the 38.8 percent of people renting in Denver-Aurora:
Westword reported the Realpage.com April 2018 Housing Survey found that metro Denver rents increased 48.3 percent from 2010 through the end of last year, the fourth-highest in the United States during that period, behind only three cities in California's Bay Area.
If you’re interested in becoming a landlord and realizing the potential from this increased number of renters, contact Park Properties Realty and speak with one of our experts on investment property today.