Refinancing Rental Properties In Today's Market

Refinancing Rental Properties In Today's Market

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Since the financial crisis that hit in 2008, investment property financing has been a little trickier to get. Currently there are fewer structural loan options, fewer lenders, more stringent criteria, less price appreciation, and more conservative appraisal values. And these same barriers apply to both traditional mortgage deals as well as refinancing. The good news is that if you are looking to refinance, there are a few things you can do to help grease the skids.

FINDING YOUR LENDER

First and foremost, do your research. Give yourself ample time to make sure you get the best deal possible. Check out lender rates on sites like bankrate.com and call a few that make your shortlist. Get a "good faith estimate" from each lender you call so you can compare interest rates, repayment terms, penalty fees, and other factors. And don't forget to factor all the closing costs into your decision.

Aside from the numbers, if you have a go-to appraiser that you like, ask each lender if you can use your guy or if you are required to use the bank's appraiser. The reason is that appraisers that regularly work for a specific lender are often instructed to be conservative on the appraised value, as this helps reduce the lender's risk. But of course, you want the maximum appraised value, and you have a better chance of achieving this if you hire your own appraiser directly.

BOOSTING THE APPRAISED PROPERTY VALUE

The second thing you can do is to make sure your income property gets the highest appraised value possible. You can do this by enhancing curb appeal to make sure the property is shown in the best possible light. Yes, appraisers are not supposed to factor in cosmetic factors like curb appeal, but the fact of the matter is that appraisers are human and as such first impressions can help tremendously.

There are a few cheap and easy things you can do to enhance curb appeal and generate a positive first impression. Obviously you want to make sure the landscaping is adequate. Don't go overboard, but pulling weeds, planting 6-10 plants or bushes, and adding fresh mulch to the front garden bed will drastically improve the look of any property. Also, obviously you'll want the grass cut the day before the scheduled appraisal.

Also make sure no other outside features appear rundown or in disrepair. Does the front door need paint? Are there any flaws in the siding? Is the fence beat up? Does the gravel driveway need a fresh topcoat? Does the paved driveway or sidewalk need repaving? Is there trash strewn about the property? If the answer to any of these questions is yes, then fix the problem.

The inside of the property also needs to be evaluated. A fresh coat of paint, new bathroom fixtures, new window blinds, a replaced or shampooed carpet, and a thorough cleaning will all go a long way toward squeezing a little more value out of the appraisal. And aside from the carpet, which is optional, these items combined will only cost you a couple hundred dollars.

BOTTOM LINE

Yes, refinancing rental properties is more difficult today than 5 years ago, but there are things you can do to maximize your odds of getting the best deal possible without breaking the bank. Just do your research to find the best lender, and spruce up the property to maximize its appraised value. Doing these simple things will help make your refinancing project a resounding success!

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