How to Get Money Out of Your Property Tax Free

Below is an excerpt from my upcoming third book My Happy Assets - Taking the Last Steps to Financial Independence.

If you like what you read, check out my first book, My Happy Assets at http://www.myhappyassets.com/ only $1.99 and the complete second book, Small Business Coffee Hour, Three Essential Ingredients for a Successful Business at http://www.smallbizcoffee.com/, only $1.99. Happy Reading!

www.myhappyassets.com

______________________________________________________________

How to Get Money Out of Your Property Tax Free

In my first book, My Happy Assets, I detailed one of the key pros to investing in real estate and that is how to get money out of your property tax free. This is one of the methods you can use in property investment that will turn your income into zero percent money. One thing you must keep in mind though when refinancing an investment property is to evaluate what the cash flow picture will look like after you refinance.

An example:

You originally bought a $100,000 property cash flowing at $250 a month with a $429 loan payment. (a 30 year fixed rate at 5% with a 20% down payment and a principle amount of $80,000). After five years, through improvements to the property and appreciation, the property is now worth $150,000. The bank will give you up to 80% equity in a new loan. So after five years, you have $76,537 equity in the property:

• You have paid down the original mortgage to $73,463
• The value of the property is now $150,000
• $150,000 – $73,463 = $76,537

Thus, the bank will give you $61,230.

If you add this new amount to the balance of the original mortgage, your new loan is $134,693 ($61,230 + $73,463) which results in a payment of $723. Thus, your positive cash flow of $250 becomes a negative cash flow of $44!

• The new payment minus the old payment gives us a difference of $294:

$723 - $429 = $294

• This difference minus our cash flow gives us a negative cash flow of $44:

$294 - $250 = ($44)

You may want to consider not refinancing the full 80%. If you merely refinanced 50% of the equity you would still get to withdraw $38,268.50 tax free while incurring a new payment of $600 allowing you to continue cash flowing at $79 a month:

• Your new loan is $111,732 ($38,269 + $73,463)
• Thus, your new payment is $600
• Thus, your cash flow is $79

$600 - $429 = $171

$250 - $171 = $79

Remember, that tax free money equates to $76,537 in earned income since by the time all is said and done, earned income is taxed at 50%.

Again, the detail of this information can be found in my first book, My Happy Assets available at myhappyassets.com.