Refi or new property?

10 Replies

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!!

I would work on option B.

I would try and find a smoking deal though. Something that you can buy at a discount, maybe put some work into. Then have after the work, the goal for the 2nd property is to have it worth considerably more than you paid for it.

Then things would begin to "balance"

If you consult a CPA buying a 2nd property could help you out on taxes.

If you can't find something though, option A is good too.

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

Easy call..... Keep buying more properties.

I would do as everyone else said and get into something better. The other property will probably work itself clean, but if it doesn't it would be foolish to throw another 40k at it. In fact, it might be worthwhile to try to insulate the new property on the off chance you had to walk on the first.

If the existing property is cash flowing, what difference does it make to you if it is upside down?

Buy the next deal, then refi that one, buy another, refi that one, buy another...

I left this out of the equation- My former residence is a rental too which cash flows about 600 per month, and I've got almost $100k equity, 4% loan. Would you refi or HELOC that now for cash to address the under water property now in addition to picking up something new with the cash?

@Mandy McAllister

I don't know your particular finances.

But going out and finding a great deal, seems to be the popular opinion. 

Originally posted by @Mandy McAllister :

I left this out of the equation- My former residence is a rental too which cash flows about 600 per month, and I've got almost $100k equity, 4% loan. Would you refi or HELOC that now for cash to address the under water property now in addition to picking up something new with the cash?

 Why do you want to address the underwater property?  It's cash flowing right?

Without any repairs or upkeep and self managing, we break even. There's no wiggle room.  I could care less that it's underwater- only the cash flow issue concerns me. 

Sell it, take a one time loss or break even.  Don't take good money and throw it into the fire.  Se what I said above

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