Refi or new property?

[Mandy McAllister]

Which would you choose to do with 40k?

My husband's former residence is now a rental property for us.  Property is worth 120k, we owe 133k.  Market rent is about 1300 per month.  Loan is a 20 year HARP at 5.25%.  PIMI, and taxes come to $1250 per month.

In order to refi, we'll need to pay down the loan to 75%, and bring 43k to the table (133k - 90k = 43k).  This would make the property cashflow about 400-500 per month.

-OR-

We could take our 40k and acquire another property that will cashflow the same 400-500 per month. 

Would you lock in something new and let the underwater property work itself out over time, or would you rather build a monthly buffer in?

Thanks for your advice!!

[Joshua Garofano]

Mandy,

I would buy another property and let the other property work itself out over time.Your not really that upside down on the property. Getting deeper into the property with your cash sounds like a waste of good cash.

If you make a good second investment and refi out at some point you could always take a few dollars from the cash out and even out your original property while still having money to get into a third project. 

All the best.

-Josh