How Refinancing Your Current Home Gives You a Real Shot At Wealth Creation

Investors often ask me this – is it advisable to refinance my current homes and use that as down payment to buy more homes? The reason they ask is that ‘refinancing’ is something of a bad word in some circles. For some, the very word smacks of risk and fiscal imprudence. For me, however, this has been a great option and one that I have used frequently. Let me explain how I made it work for me and how you can make it work for you:

Why refinancing is a good idea.

So you are still paying for your house – the one you live in or the one you have bought as an investment. Should you refinance this? A lot of people would caution you against this. And to be sure this option is not for everyone. If you are an aggressive investor and someone who is willing to step out of your financial comfort zone, this is a great option for you. 
If you're someone who imagines wealth in your future and not a scenario where you're just getting by, this is for you.
So depending upon the interest rates at the time, you can take a call about refinancing your current assets. This generates a significant cash flow, and one that is tax free, by the way. This cash flow is then used for the purchase of a new home. You use it to make the down payment for this new home. This is something that I have done myself, because my aim was always to buy as many homes as possible. To my mind any asset you currently own represents the potential for creating more assets for you; more wealth for you in times to come. It would be a shame not to capitalize on that!

Don’t regret your decision later.

Now there are a great many of our investors who have been fiscally conservative, unwilling to take any chance that they saw as risky. However, over the years they would realize how it is possible to ‘make money from money’. There would then be some amount of regret that they didn’t go ahead and buy more homes. I have often heard investors saying this: “I wish I had bought more homes.”  They could have used the refinancing option to buy more homes but they did not. They could have been even wealthier in their retirement years than they ended up being.
Refinancing your current home may seem risky but it really is not – it is a well calculated risk at best and one that pays over the long term. When you refinance your home you generate cash flow to make the downpayment for a new home, which will soon start to generate a rental income. This will soon create a positive cash flow or help you break even at any rate. Find out more about this option in my latest video.

Inflation Means Higher Interest Rates – But This Need Not Impact Your Investment

“Now that interest rates have gone up by 3% relatively quickly, home prices are up significantly from a couple of years ago. So, is buying single family rental homes still worth it?” This is a top-of-the-mind question for a lot of investors right now. This is something that I get asked on social media, by people reaching out to us at or people who attend our quarterly online expo events. And to these people I have one simple, straight answer – Yes! It is worth it. Investing in real estate using the formula we have perfected at ICG Real Estate is always worth it. I have also explained this at some length in this article.

Inflation is rising, but this is not necessarily a bad thing.

I have been shouting from the rooftops about the inflation that is going to come, and come it has! Everything is more expensive right now and your hard earned dollar is simply not going as far as it used to. Rising inflation inevitably means that interest rates are going to go up, and that is what we have seen as well. Where, until recently loans were available at the lowest ever interest rates – as low as 2% in cases – all that has changed. Rates were between 2% and 4% and now that figure has climbed to about 7%. This has alarmed a lot of people and made them wonder whether or not to invest in real estate.
So here’s the thing: if interest rates are at 7%, they are still lower than the inflation rate, which is hovering in the region of 8.5%. And when I look back at my long investing career, that 7% is still an astoundingly low rate. Investors – and myself, I must add – have grown very wealthy with the help of investments made in times when those rates were a lot higher. In fact, when I first started to buy property back in the 1980s, interest rates were as high as 14%. And I still was able to create positive cash flows and keep buying more and more houses.

Why you don’t have to worry about 7% interest.

I get calls and emails from investors who are happily wealthy, having invested maybe fifteen years ago when interest rates were 7% or 8%. These investors went on to buy multiple homes. They did this by first generating a positive cash flow from rental income and then buying more homes. And then some years down the line, when there were still some years left on the loans, they sold off a couple of the homes. They then paid capital gains and repaid the remaining loans, and now enjoy their investments, free and clear!
So, don’t worry about the 7% interest rate. Your real trump card is the 30-year fixed-rate loan – which Warren Buffet also recommends. With this loan, inflation is your best friend! With inflation, cost of living will rise, and hence your rental income will increase as well.  However, with the 30-year loan, your mortgage repayment is never going to change. And that amount is going to look smaller and smaller as the years go by while your rental income will continue to rise.
I have a lot of stories about successful investors who were buying real estate when interest rates were much higher than they are right now. I will be sharing some of these stories in the upcoming expo and will also go into the details of rising interest rates. To know more, you can check out this article or watch this video.
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