Cash Out or Reinvest

There are many ways to raise money to invest in real estate. Or if you already own investment real estate, you could decide to sell and cash it out. The question is if you should cash out or reinvest? Before you answer that question, you need to ask yourself what you will do with the money if you cash out. You could use the money to fund a retirement account like a 401k or IRA but then you still need to find a way to invest and grow that money.

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Do you want the money in the stock markets where a self-serving financial adviser is making your investment decisions or at the least, a self-serving board of directors makes all of the financial decisions for a corporation that you personally make a decision to invest in? When making the decision to cash out or reinvest, you could use the money to start you own business. At least you'd still be in control. One thing you almost certainly don't want to do is put the money in CDs or a saving account paying less than the rate of inflation.

 

Cash Out or Reinvest? - Reinvest

You could invest in gold as many people have done over the past few years as a hedge against hyperinflation. So far, the hyperinflation hasn't materialized and as the economy has stabilized, the value of gold has declined over the past few years. Real estate is what has been appreciating those same years, out-pacing inflation.

Deciding to cash out or reinvest leans heavily towards reinvesting. When your investment property is appreciating in value and turning a positive cash flow monthly, the logical decision should be to stay in real estate. What you should do is take the time to study the current market. Ask yourself if your current investments are the best investments you can be holding? When it comes to the cash out or reinvest question, the real question is if your current investments are the most profitable that you can be holding.

Cash Out or Reinvest - Find Something More Profitable

First, look at your least profitable investment property. Can you sell that property to invest in one that is more profitable?  Maybe, you don't even want to sell your least profitable. Can you use existing properties to cross-collateralize a new investment property to further grow your real estate empire? As I've said often, real estate investing isn't about fully owning the most properties; it's about controlling the most properties. Using existing properties to finance another property could well be your best answer when deciding to cash out or reinvest.

Let's say that you have an investment property that currently has about a $150,000 mortgage. It's a 15-year mortgage but you can pull $25,000 of equity out by refinancing. That will raise the cost of the monthly payment on that property by about $35. If that property is worth keeping, it's certainly paying much more than $35 a month in positive cash flow. Now, you use that $25,000 cash out to invest in another positive cash flow property. This is truly leveraging your investment money because you end up with another profitable investment and another property that is appreciating in value.

What is always smart is to be constantly asking yourself if it's better to cash out or reinvest. Too many investors get into a property and forget about it. They go year after year without asking themselves if there is a better investment opportunity that they should be pursuing. Or if they should be looking for ways to leverage the investment money they already have. From my experience, even part time investors should be looking for a new real estate investment opportunity about every 18 months. Not only do you have the opportunity to leverage your money, but the more real estate that you control, the more your investments are diversified.

By Wendy Patton

For more than 30 years, I've used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It's because of that fact and my personal success that I share the Sandwich Lease Option System with others.

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