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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4451
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I dont want to sell my rental properties if possible. I need

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I dont want to sell my rental properties if possible. I need more income. Is it best to take an equity home loan to live on that increase and count on rental property value increase in the future( to pay the interest) or should I just sell one of the four rentals at a time for the cash? They have lost a lot of value in past few years. 149,000, 83,000 , 83000, 110,000 currently. rents 825,699,699 and 1000. Hoa 200each Tax about 600 -800 each per year.

. Home value 195,000. Only debt is 13,000 on home. I need to pay off credit card debt and need about $2000 more income per month. SS is only $810. Health is not very good . Thank you very much. This is a hard decision for me to make -sell or borrow. Single Mom , live alone.

Dear Madam,


You should adopt a combination of both, i.e. sell and borrow. In my opinion, you should sell one unit and that will give you cash that you badly need. Secondly, for the remaining ones, I would advice you to hang on to the units with their rentals rather than taking out an equity. The basis of this is that the real estate markets / and the economy as a whole are showing signs of recovering in short to medium term and the valuations of your homes are bound to appreciate.


I hope this helps...


Customer: replied 5 years ago.

Thanks so much. So I am clear, you mean not to take out a home equity loan for the cash that I need but instead to sell a rental unit?


Is this to save the cost of the interest? I was wondering if the appreciation in the rental units would compensate for the cost of the interest if I pull some money out of my home and keep all the properties? Is there some formula which can help with that decision. If I pay 6% on a home equity loan and calculate a percentage for future appreciation, etc. Or is this a decision that has no such math to it?


Thank you very much for your assistance. Lynne.


Dear Madam,


This has just no maths involved it it. It is clear, if you have existing asset, save on interest cost as long as possible. So,with this, i.e. by adopting a combined approach, you will have required chunk of cash in one go, without any cost (interest) attached to it and then in my opinion, your valuation of property shall rise. There is no need to create liability of an equity loan in my opinion.


However, if you are reluctant to sell, then you may go for home equity loan on JUST ONE of your unit for your cash requirement. In this case, your appreciation of the rental units would certainly compensate for the cost of the interest.


I hope this helps...


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