Refinance and sell

Refinance: the cash-out

A refinance replaces your loan with a bigger one, based on what the building is worth now. The new loan pays off the old one, and the difference comes to you as cash. Borrowed money isn't income, so a cash-out refinance is tax-free, and you keep the building and its rent.

The lender has rules:

• The building has to be stabilized: leased up and at least 90% occupied. That's what the business plan is for.
• The rent has to keep covering the payments on the new, bigger loan.
• The building can't be listed for sale or in escrow.
• After a refinance you wait six months before the next one on the same building.

The new loan is 72% of the building's value. From that come the old loan and about 1.5% in costs; the rest is yours. Better finance skills raise the share and cut the costs. The rate is today's market rate, so a refinance is partly a bet on timing: see The market.

When a building is ready, a Cash in? card shows what a refinance pulls out and what selling would pay, side by side. ChooseRefinance and it costs an action, then funds when the month ends. The money arrives in the month-end reveal.

Selling

You can list a building after you've owned it for four months. Open it in your Portfolio, pick a strategy (Quick Exit,Balanced or Premium) and an asking price, and list it. Listing costs an action. Offers arrive over the following months on the Pipeline tab, and you answer them the way you would for a client: Accept, Counter at asking or Pass. An accepted offer goes into escrow and closes like any other deal.

Hot listings

The market keeps moving while your building is listed. If it runs past your asking price, your listing turns hot: buyers line up, more offers come in, and some come in at or over asking. The offer card and the building's page both show where the market is now, and aRaise your price button that lifts your asking price to match. Offers already on the table stay; new ones come in at the new price. Nothing raises it for you. It's your call.

What a sale pays you

The sale price, less:

• Selling costs of 5%: closing costs, transfer tax and the buyer's broker.
• The loan you still owe.
• Capital-gains tax on your profit, at a rate set by how long you held the building:

Quick flips pay the most tax. A building held three years pays the least. The Cash in? card and the building's page show what a sale puts in your pocket after all of this, before you list.

Hostile offers

Sometimes a rival broker wants one of your buildings and makes an offer you didn't ask for. The card shows their price and the cash you'd keep. Not for sale turns them away; Sell to them takes the money.

Refinance or sell?

• Refinance when you want cash for the next building and the one you have still earns well. No tax, and the rent keeps coming.
• Sell when the market is hot, the building is held long enough for the lower tax, or it's the cheque that gets you a much bigger building.

For your score, it's closer than it looks. Your net worth already counts each building at what a sale would pay you, so selling doesn't raise your score by itself. What you do with the money does. See Career and score.