Should I sell, pay off principal, or save? (negative cash flow)

Question

Hello -

I am a 24 yr old. who owns 2 houses - recently my monthly payment for my first house went up $300 and it's making me reconsider my investment.

The story of how I got in this position: I bought a house at 23 and house-hacked it. (free living) The deal was a $239k house, 3% down, 4.5% int rate.

At 24 I bought another house and am currently house-hacking it. The first house I rented out with property mgmt. helping me out.

The first house is now worth $265k, and with the new monthly payment now I'm -$100/mo. I feel like a recession is coming up so I kind of want to sell but then again the seller fees are making me not want to sell it so early.

Also, with the interest rates so low, I kind of want to pay down to reach 20% equity so I can re-fi.

My third option is to just keep stashing into savings and riding out the 2 houses and buy a third one. I really don't know which one is the best idea though so any help would be appreciated. Thanks in advance.

Account Closed · Answer

I would ride it out, chances are your principle paydown is equalizing the -100/Mo. Once you're in a position to ReFi , I would. And then in a year or two increase rents and you should be totally fine. Hold!

Kelvin He · Answer

@John Teachout noted, will shop around some more come renewal time. thank you!

John Teachout · Answer

Maybe you need to check with another insurance company. All of our properties cost less for a landlord policy than they would as a primary residence. I suppose it varies by area. On a landlord policy, they're covering less stuff. (no contents, etc)

Kelvin He · Answer

@John Teachout  for Nov. 2019 it was $6100. They are estimating $6100 for taxes again come Nov.

@Theresa Harris

I think it's a combination of homestead exemption going away, a shortage in funds in escrow, and also the fact that my homeowners insurance went up after I turned it into an investment property.

Theresa Harris · Answer

Why did the payments increase?  Buying and selling costs a lot and you are right, if it has only been a year since you bought it and you haven't done major upgrades (and even then), you are going to lose money on it.

John Teachout · Answer

$3600 per year seems like way more than what additional taxes would account for. What have your annual property taxes been in the past?

Kelvin He · Answer

Ah yes, the principal payments are around $300 now. Thank you.

Kelvin He · Answer

@John Teachout lender says shortage of escrow funds for real estate taxes. could be due to the increase in home value due to appraisal or because my homestead exemption went to my new house

John Teachout · Answer

Why did your payment increase? Do you have some type of ARM on it?