| One of the easiest and safest ways to get | | | | The beauty of turning your primary residence into |
| started in real estate investing is to do it when | | | | a rental house lies in its ease and relative safety. |
| you are ready to sell your existing home and buy | | | | On the other hand, if you were to buy a rental |
| a new one. I propose that you just refinance | | | | property without using this technique, you might |
| your present home, instead of selling it, and use | | | | spend a couple months making repairs before you |
| the money from the refinance as a down | | | | could move some tenants in. In that case it could |
| payment on your next house. Now, you own two | | | | create some economic hardship because you |
| houses and you can just turn your old house into | | | | would be paying two mortgages at the same |
| a rental property. It's as easy as pie. | | | | time. It's like the difference between taking a |
| Refinancing is easier than purchasing | | | | small jump over a little stream verses taking a |
| Refinancing is similar to the process you | | | | giant leap over a wide river. I prefer to keep my |
| encountered when you closed on your first | | | | shoes dry and take the small jump. |
| mortgage. It requires an application, credit check, | | | | Cash-out mortgage refinancing |
| new survey and title search, as well as an | | | | Cash-out refinancing involves refinancing your |
| appraisal and inspection fees. It's actually much | | | | mortgage for more than you currently owe and |
| easier and quicker to refinance a property than it | | | | pocketing the difference. If you have been paying |
| is to purchase one. | | | | down your mortgage for some time, then the |
| When I first refinanced my townhouse to get | | | | principal is likely to be substantially lower than |
| money to purchase another house, I was a little | | | | what it was when you first took out your |
| nervous. I thought, "Is this going to create too | | | | mortgage. In addition, the value of your home will |
| much a financial burden for me to pay two | | | | likely increase in value over time, which will further |
| mortgages at the same time?" But, it turned out | | | | increasing your equity. |
| that I never had to pay two mortgages at once. | | | | This double build-up of equity (through paying |
| Avoid paying two mortgages at the same time | | | | down your mortgage and the increased value of |
| While we were going through the 6-week closing | | | | your house over time) will allow you to take out a |
| process to purchase our new house, my wife and | | | | loan that covers what you currently owe on your |
| I were busy preparing our "old" townhouse to | | | | home, and a little extra. The extra that you take |
| rent out. The same day that we closed on the | | | | out when refinancing is used for the down |
| first house, we put the "For Rent" sign up on our | | | | payment on your next house. |
| townhouse. One week later, we had tenants | | | | Turn your home into a rental property for |
| renting the townhouse. The monthly payments of | | | | economic security |
| the tenants covered the cost of the mortgage, | | | | Turning your home into a rental property is a |
| taxes, insurance, utilities, and the $40 left over | | | | great way to establish a new income stream, and |
| was profit for my wife and me. | | | | when tight economic times hit, we can't have too |
| Choose the safe and easy path | | | | many of those. |