Refinance? but much higher mortgage payment?
Hi BP members,
Last year, I partnered up with my family and bought a $700,000 triplex with a 30-year fixed rate conventional loan. Took a loan of $525,000. I also have a conventional loan on my primary residence. Me and my family are ready to buy a second rental property. We want to do so without tapping into too much of our own cash and re-leverage using equity from the triplex. Let's say the appraised value for the triplex is $800,000, how should we go about financing the second deal? Cash out refinance, line of credit, or HELOC?
If we refinance the whole mortgage and a bank loans us 75% of equity, so ($800,000 - $525,000) * 0.75 = $206,250. I am worried that our cash flow (roughly $1000 on a good month) on our current triplex will not cover the new higher mortgage. I calculated that the new mortgage payment will roughly be $1000, which means the triplex will now only break even even without repairs). Maybe I misunderstood how BRRRR strategy works. How do people do this? What is my option? Any help is appreciated. Thanks!