Refinancing Real Estate Investor Loans
Three Options for Upside Down Properties

Real estate investor loans are mortgages for non-owner occupied properties. Although houses can be initially purchased for investment purposes, many evolve into rental properties when homeowners buy a new owner occupied home.

When Monthly House Payments Exceed Rents

That's the case with Helpless In Kentucky who bought one home without selling the first. Within a short period of time, she knew in spite of attractive mortgage rates, her chances of selling the rental were slipping away due to a weak real estate market.

Along with that, the monthly house payments did not cover the rent. A decline in average mortgage rates helped but falling values in the neighborhood made refinancing her rental difficult. Under such circumstances, she couldn't find any lenders agreeable to refinancing a rental property upside down in negative equity.

Three Options for Real Estate Investor Loans

With this in mind, here are three options for investors sandwiched between negative cash flow and plummeting real estate values.

1 - Refinancing Rental Properties

A new mortgage to lower the monthly house payments will improve cash flow, the difference between the cost of operating the investment property and the rental income. But anticipate bringing cash to the closing table due to declining appraised values.

2 - Selling Rental Properties

Reduce the price enough to entice a buyer and gain the upper edge with competing properties. Expect cash to be required to pay off the mortgage.

3 - Taking Advantage of Negative Cash Flow

The important factor to take into account here is taxes. Consult a tax professional about advantages of negative cash flow and the possibility of a positive affect on your tax liability. You may find the fact that rents do not cover the monthly house payments to be a benefit.

Real Estate Investor Loans and Negative Equity

To summarize, all three options include cash. Options one and two require lump sums at the close of a real estate transaction. Option three depends on smaller amounts of cash in comparison but requires it on an ongoing basis.

Without a doubt, there is no magic bullet for negative equity. Believe me I wish I had one right now because for investors caught in a weak real estate market, there are few ideal choices. But when decisions must be made, it is a matter of picking the best available option.

Are you familiar with investment properties? What alternatives did you find for refinancing rental properties weak in equity? Tell other Readers what has worked for you.

Please offer your advice at Refinancing Advice - Nuts And Bolts. Your voice of experience could help a fellow investor.

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