Why You Need To Refinance Now! (Inflation)

welcome to short-term rental riches where we'll discuss investing in real estate but with a specific focus on short-term rentals to help you build wealth faster with as little headache as possible so i was in the u.s a few weeks ago at a investment conference actually not a real estate investment conference i like to kind of i like to diversify into some other things so this was a mining primarily a mining and precious metals conference but something happened when i was staying in the hotel there and

i went to the cafe starbucks and i bought a coffee and i bought a banana and i didn't check my receipt until i'd already paid i didn't really question the prices it did seem very very high though and then i looked down at the receipt and realized that i paid two dollars for one banana two dollars that is the most i've ever paid for banana in my life in fact for two dollars down here in colombia you could buy more bananas than you could imagine so

this week that's all to say inflation has hit us right inflation is higher than it's been in a 30-year period in fact according to the us department of labor's latest published data the u.s inflation rate for the last 12-month period was 6.2 percent that is huge and as a real estate investor that uses a lot of leverage this is really important so this week i want to talk about inflation whether or not you should refinance and pull out some of this equity and a reason a

couple reasons why you might not want to and stay tuned because i want to give you a few of my lender referrals as well i just closed three loans last week and i'm still working on some new ones so let's go ahead and jump right into it so as i said the u.s inflation rate is higher than it's been in almost 30 years and from what most economists can tell from most of people i follow can tell that's not going to be slowing down anytime soon

so this inflation with all of our prices going up our real estate has been going up as well now real estate has been going up because we have a housing shortage we've talked about that in a prior episode so we've got a couple things going on here we've gotten we've got raised asset prices from inflation and from appreciation so it's very likely that you have a lot of equity in your properties if you've owned properties for a few years so should you pull that equity out

my short answer is yes now i know that makes some people weary and cautious but i want to talk about three reasons why you should pull that out and then we'll talk about when you shouldn't pull that out so number one if you think you can pull out your equity let's say you've got fifty thousand dollars in equity and you can borrow at four percent well all you really need to do is find an investment to do better than four percent right and then that money

is paying for the money that you borrowed now i'm referring when i when i talk about refinancing i'm assuming you're getting fixed long-term debt like a 30-year loan so if you can pull that money out and you can do better than the interest rate you're paying on that money in some other form of investment or more real estate which i highly recommend then i think you should do it we're gonna get to the reasons why you shouldn't do it but that's number one now you might

be thinking i don't know what to put this extra money into there are lots of things to put your money into you just need to explore you can put it into more real estate of course that takes a little more time but you can put it in passive real estate investments from friends or family or colleagues or someone you met at a conference you can put it in one of their deals you can put it into precious metals like gold which is history's longest form of

money and it is a good store of wealth although it wouldn't technically call it an investment doesn't pay you any money back right but technically speaking historically speaking gold has been a very good hedge against the dollar so it doesn't lose its value like the us dollar does so pull the money out if you think you can do better than whatever rate you're paying to pull it out pull the money out if you think inflation will continue and from the trillions and trillions of dollars that

were printed i think it's going to continue whether we like it or not and now this is worldwide as well i mean we're seeing prices rise all over the place so if you can lock in a low interest rate today at historically low interest rates and you think inflation is going to continue then that's another good reason to pull it out number three pull your equity out if you think the market is going down or if you think the market's going to crash now that probably

sounds crazy why would you want to pull out a larger and have a larger payment when your value of your property is going down well i would say because if you have fixed financing especially if it's for 30 30 years then it doesn't matter what the value of your property is especially if you're renting it out hopefully you are that's what this show is about we talk about rental investments mainly short-term rentals but these both come into play here and if you listen to a prior

episode rents are going up so even if your property value goes down as long as you have a fixed rate for a long period of time and your rent is covering that mortgage payment then you're going to be okay so those are my three reasons and that leads me to the reason why you shouldn't pull out your money and one of i've got two reasons for you but the first one i just glimpsed at is if your mortgage payment can't be covered by your rent i

should say your mortgage payment and all of your expenses on that property can't be covered by your rent you don't want to have more expenses than income coming in that's a bad recipe so you don't want that the number two reason that you shouldn't refinance in my opinion is if you're getting ready to sell of course you don't want to pay a bunch of loan fees refinance fees and points and underwriting fees and all these things and go through the paperwork and the hassle because these

things can take a little bit of time if you're planning on selling your property but i would say if you're hesitant about selling your property or maybe you're 50 50 and you don't think it'll be sooner than a year i think you should really consider still refinancing so if you're not planning on selling anytime in the near future then i would very very much consider refinancing and this leads me to my next point which is a really big misconception about real estate prices and our wealth

let's say you have 10 million dollars in property but most all of that is in equity well you might think you're rich but you're not because equity is not permanent it's not fixed it can go away if the market crashes and all that equity you had built up in this 10 million portfolio gets washed away well then you don't have access to it so unrealized gains are not real until you realize them so if you fit any of these scenarios where you have equity and you

think you can take it out and make more than the money you're paying i know that you can you just got to explore a little bit i would really really consider refinancing your properties like i said i just did three last week i'm working on more and again if you have challenges with the lender there's lots of lenders out there you might get denied but keep trying i've gotten denied recently it happens all the time i want to give you three referrals for lenders that you

can check out so these are all nationwide by the way and this is in the u.s but the first one is a company i haven't used personally but i believe that they are specifically geared towards short-term rentals and that's host financial we'll put links in the show notes and we will also get these on our recommended resources on our website at restmethods.com if you haven't checked it out yet head there because there's a lot of good info we've got all kinds of different recommendations in terms

of furniture and software to use and we'll have our lenders on there and everything so and it's free so go ahead and check that out it's at restmethods.com under recommended resources so host financial this is one option vizio lending vizio lending is who i just used now i wouldn't say that they were easy to work with in fact it was a total pain in the butt it took a really long time but we got it done and this is the thing to remember about getting a

loan you deal with the lender when you get your loan after that everything's on autopilot right you're probably going to put up your your mortgage payments on automatic payments and if you never changed anything you'd probably never talk to that lender again so even though it might be difficult in the beginning make sure you're shopping around and stick with it until you get something done because you won't have to deal with that headache after it's complete so those are two referrals and the third one is

a personal broker of mine that i've worked with a lot and her name's shannon she's from mutual of omaha i'll put her information online too she really knows how to get some loans done i've done a lot with her too and she works more with the smaller residential properties so one to four units although she can do some stuff over four units as well so we'll have those in our recommended resources make sure you check them out and i just want to leave you with one

comment and and that's it most of the time we're managing our real estate portfolios but we also have to manage the equity in our real estate portfolios as well we want that equity to be working for us in an environment where rents are going up and we're investors investing in rental property we're in a good position so talk to these lenders talk to any lender you can really consider your situation if you have equity i highly suggest pulling it out that's what i'm doing it's gonna

help you beat inflation so when you have to pay two dollars for banana one day you're not gonna be as upset so until next week i hope that gave you a little more insight check out our resources and we'll catch you back here next week you