Cash Out Refinance or HELOC?

2 Replies

Hi, My initial dive into real estate investing was converting a primary residence into a rental property when we bought a new house. When we bought the first house, we signed a 15 year, which we are currently 5 years into. We have had tenants for 18 months so far and it's been great. As I run the numbers now, the rental isn't cash flow positive when accounting for vacancy and capital expenditures because the mortgage is high. Rent is higher than the mortgage though by about $250 dollars per month. Any thoughts on whether I should push through for the next 10 years until it's paid off or refinance now (cash out some property appreciation) for a 30 year and ensure that the property is cash flow positive. House was built in 2007, and is in great shape. Probably would need a new roof around the time it's paid off. Thanks!

I'm in the same boat. I used to have negative cash flowing properties and swore I would never do it again. However, have you listened to one of the recent podcast? 7 paths to financial Independence? Made me think twice. What if you took out a HELOC and purchased a cash flowing property with that money to help offset the loss.

@Alex Sabio I haven't listened to it yet, but I plan to do so tomorrow. I'm not underwater on the property because it hasn't cost me anything to maintain and I manage it myself. The deal just doesn't work on paper once you allocate money for repairs and capex. I guess a better question might be, "are 15 year mortgages useful in real estate investments?" Seems like everyone is concerned about cash flow (rightfully so), and therefore they go with a 30 year. My situation is unique in that I'm already 5 years into the 15.