Hello my name is Danielle, I have a question about what is best to do in my situation. My grandmother passed away and left me her home, it is paid off and its Market Value is about $50k. I would like to lease it out but I need a few things done to the property before I can take that step. Would it be wise to take out a line of credit to fix up my grandmother's house so I can lease it out? Or should I not do it because it is already paid off? Please advise.
Hi @Danielle Tucker - this decision will largely depend on your personal attitude toward debt and your specific financial situation. Many people prefer the security of owning property free & clear, but other factors to consider are the currently low (very low) costs of borrowing and the potential risk of becoming a target for litigation on assets with lots of equity.
If I were in this situation, I'd probably want to take out the HELOC, fix up the property, rent it out, pay off the HELOC, and then do a cash-out refinance to a 30-year mortgage with a low interest rate that my tenant will pay off. Of course that depends on finding a lender with a product that fits your situation, but I would think it should be doable! You'll also probably want to talk to a local property manager to get a good idea of what you can rent it for to make sure that the numbers work for you.