The general idea of taking equity out for investing is ok. You probably will get a lower rate than on a loan secured on a rental property. However, there are limits on deducting interest on your home mortgages that may reduce the tax benefits you can get. But, while something to consider, it probably should not stop you from doing it.
However, the investment that you have suggested may not be a good one. Many people find that their investments in that type of resort property is a bad investment. I would suggest that you need to investigate carefully as to whether this could be one of those bad situations. The companies that rent out the properties typically take 40% of the rental amount. And the property may not be rented every week.
I suggest that you need to investigate carefully before you do this. Look up owners of simiiar properties in the county tax records, call them up and ask them how good of a deal it is for them. Check the turnover of such properties in the county assessment roll, if you can. If you find that a lot of people resell one, two, or three years after buying, what does that tell you? If you can, talk to some people who have recently sold of similar investments. Or, if you can talk to a few tax lawyers who cater to people with these types of investments, you might very quickly get the scoop on how good they are.
Now, it is possible that this would be a great investment in the location you are talking about. Or maybe not. I would never buy such a deal without the type of investigation that I suggest.
Good Investing**********Ron Starr*****************
My current rate is 8% and thinking about refinancing and getting cash out. I’ved never done anything like this and I was wondering what everyone thought ?
Re: Refinancing and Taking Cash out ? Should I ? - Posted by James Strange
Posted by James Strange on January 11, 2003 at 02:22:32:
As for the rate you will have to compare the cost to refi with the lower payment and see if it makes sense to you.
As for the cash out, what do you plan to do with the money? If you are going to blow it then it is a stupid idea. If you will invest it in something that will generate a large return then it may be a good idea.
I currently have a interest rate of 8% on a 30yr note. I can get a rate of 5.625% on a 15 yr. I plan to buy a cottage on the coast right next to the ocean and a major salmon river. The cabin is being sold below market value because the person owning it has 2 outstanding mortgages on it and wants to get married in May and buy a house but can’t get financing because of the loans on the cabin. I plan to use the cabin myself for a few weeks a year and rent it out to tourists at other times. I also plan to pay off some high interest credit cards…
I was just curious about getting cash out because I worked hard to get the principle paid down and it kills me to have a higher principle again.