Dealing With Liquidity Bottlenecks in Real Estate Investing

Assets without Cash
cashflow managementWhen you buy property you have to make allowances for the fact that property is one of those assets which cannot easily be turned into cash. On the other hand you will need cash to run your business. This causes a dilemma if you have no really no cash flows coming in and you have some valuable property which needs to be managed as part of the process of real estate investing.

Banks recognize this fact and might have certain arrangements to deal with people in the real estate business so that they do not have to close down their business just because of the lack of availability of inward cash flows. This article aims to highlight some of the ways in which you can deal with your problems.

Raising the Money
mortgage refinancingRemortgaging is one of the first ports of call when you are in situation that requires money yet you are unable to or unwilling to sell your property. The level of borrowing that is available to you will also depend on the amount of cumulative equity that you have in your property. If you property has risen way beyond the purchase price due to price inflation or the fact that you have added enhancements to the property which have increased its value means that you have more leverage when attempting to raise money via a mortgage.

Obviously you will not want to be in a position where you are borrowing far more than the value of the property. In fact the bank will insist on an independent assessment to ensure that they are getting value for money when they allow you to mortgage your property. The cash that is raised from such an arrangement has to be dealt with in a very sensitive manner because you are in effect using some of the equity value within the property investment and rather than spending it on personal things, it is far better to use it to grow the business.

If you are involved in the real estate investing business, you may actually decide to just take out a loan but then when they ask you for collateral, you volunteer your property. The presence of collateral will not only increase the amount you can borrow but it will also give you leeway as to the payment terms. That way you can use your valuable property to raise quick cash which will help you in the running of your business.

There are risks involved because if you do not pay up in terms and to schedule the banks will be looking to take away your property. If you are a person whose only source of income is from real property investing, then you will be well on your way to financial ruin if it befalls you that you have to give away your asset simply because your were unable to pay the loan.

The third alternative is simply to sell one of the properties in the real estate investing portfolio in order to support the cash flow requirements of the other properties. This is akin to making a loss leader strategy but it may just about work for you.

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