HOW TO GROW YOUR WEALTH BEFORE RETIREMENT
A real estate agent recently introduced me to a client who owns a rental condo in California. He was looking to pull out some equity to invest in a two-unit rental property—a strategic move to grow his assets before retirement.
The Numbers:
- Condo Value: $720,000
- Mortgage Balance: $185,000 @ 2.5% interest
- Total Monthly Costs (incl. taxes/HOA): $3,400
- Monthly Rent: $3,750
- Equity Available: Substantial
He wanted to pull out $350,000 for a down payment on a $1.3M duplex. Initially, a home equity line of credit (HELOC) was an option, but with investment property rates around 9%, that meant $2,625/month in interest alone—too costly.
So, we explored a cash-out refinance:
- New Loan: $540,000 @ 7.25%
- New Monthly Payment: ~$3,683
- Annual Negative Cash Flow: ~$20,000 — which could provide valuable tax deductions (pending CPA advice).
The Result:
The client now has the capital to buy a two-unit income property, expected to appreciate to $2M in 10 years (assuming 4% annual appreciation), while his condo grows to ~$1M. Both mortgages will be partially paid down or refinanced when rates drop.
Estimated Retirement Asset Value:
~$3M in real estate with reduced mortgage debt = $1.5M+ in net wealth
✅ If he had kept only the condo, his gain would’ve been much lower—limited appreciation, no tax strategy, and less rental income.
The Takeaway:
With smart refinancing and strategic acquisitions, you can significantly increase your assets by the time you retire—even in today’s market.
Thinking about your own retirement plan? Let’s talk.
(415) 225-7920, or email: mannykagan@comcast.net
Best wishes,
Manny Kagan,
President,
Pacific Bay Financial Corporation
Your professional mortgage broker since 1983
NMLS #205637
DRE #00874630