Should I sell my duplex? Or refinance and hold

Question

Numbers

Bought it for 175,000 a couple years back

Down payment was 18,000 plus 20,000 fix up

Now I owe 135,000 , it just got appraised for 242,000 , in this market I could sell it for 250,000

One side covers the mortgage and the other side is pure profit

Easy to rent, popular area , had somebody signed the lease sale day somebody moved out

If I list it my notifications will go crazy over 100 responses

Not bad for my first one. But now I’m in a middle of a refinance,  haven’t closed yet , having second thoughtsafter the appraisal

David Meng · Answer

What I did was to hold my properties for the long-term, using cash-out refi to pull the cash out to buy more properties.  The math shows that this increases the rate of return and grows my wealthy faster.  Good luck to you.

Account Closed · Answer

There are tons of flaws with this thread- it doesn't make sense.

The 1 unit covers the mortgage and the other unit is pure profit? No it's not..

Your interest rate is dropping 2% and you're only saving $50/ month? You're saving much more than that..

Your lender is pushing Refi's because he's making more money on a refi than a heloc.. Find a new lender..

Worst case scenario? What is worst case? The rate you were told isn't the correct rate you're locking? Find a new lender..

Run your own numbers, Math doesn't lie and none of this makes sense.

Michael C. · Answer

Refi/lender sounds terrible. And numbers don’t make sense. 135k at 5.25%=$742 payment mortgage only

135k at 3.25%=$586 payment mortgage only. ($156 difference)

$15k in refi fees (That’s crazy)even at 150k at 3.25%=$651. That’s more than $50 bucks difference. something is fishy.

Andrew Powers · Answer

What is the goal with buying your next properties? Is the thought of selling just to have extra cash on hand? You could make it win-win by keeping the property / using the equity to get a HELOC to be used toward the next property.

Was the appraisal low during refinance process?

Brian G. · Answer

@Michael Conrad my advice is Do Not do a rate/term refi if you want to grow your portfolio. If you want to own your current property in 10 years, improve your credit score and then do a cash out refi if the property can service the debt (ie still cashflow) and buy another property. A Heloc is another strategy if you plan to BRRR or flip but imo you need a large line for that make sense (ie enough to purchase a deal in your market of choice).

Tchaka Owen · Answer

@Michael Conrad - again, the numbers do not make sense in an apples-to-apples comparison. As a former lender, if you were my client I would strongly advise you not to refinance if you were saving $50/month.

Suggestion: you run the numbers yourself and see if you end up with $50.

Better yet.....show us your current numbers and what they deem to be the post-refi numbers and we'll sort it out for you.

Benjamin Tennyson · Answer

@Michael Conrad So I am newer to real estate than a lot of people but I am in the middle of a similar situation.

I have a townhouse that I bough and has appraised roughly 50k higher than where I bought it. It rents very well and I get about a 15% return on my cash. I was tempted to sell it but after the fees and taxes is would only be about 3 years of rental profit. So I looked at the refinance which only saves me $100 a month. Which isn't worth the four grand in closing fees.

What I ended up going forward with was a cash out refinance but I only pull out the amount of cash I could withdraw without raising my payment and without injuring mortgage insurance.

This allowed me to pull approximately 30k in cash out while keeping a strong cashflow and not risking going underwater on the property. That 30k is a down-payment and portion of rehab on my next property without touching my emergency fund and additional cushion I keep.

Hope that helps, I am new to BP forums and noticed you were in a similar situation as what I am going through right now.

Also my logic when deciding if I want to sell is. Can I see myself buying that property for that price again in 5 years which for my situation is a hard no and the neighborhood seems to be on a significant upswing.

Tchaka Owen · Answer

Start with an apples to apples comparison. If you are refinancing $135k from 5% to 3%, you are saving a lot more than $50/mo. So what other variables have you changed to get to that number?Also, let's assume a refinance costs $5000........removing variables such as opportunity cost of investing that money, you're looking at a 100 month breakeven. That would be a huge NO.

What info are you not sharing with us?

Michael C. · Answer

@Brian Gerlach

this is a smart move!

Michael C. · Answer

Again, Thanks for the help from everybody, really appreciate it, I feel like this Duplex is one of my Ace cards and I don't want to mess this up!!!

Haven't signed anything yet, have a couple more days until closing!

Ran the numbers myself and it really really seem like a bad move!

FYI MY DEBT TO INCOME RATIO isn't good right now because I took a break from OVERTIME after working 70 to 80 hours for a couple years

He said well I get two months off my mortgage and an escrow check worth 2,000 , which still don't seem worth it,

I'm already profiting off this place, so extra money I would get 2,230( 2months) after my regular profit +2,000 escrow -680 appraisal = 3,550

Payment was 1,113@5.25%135,000 and the refinance  would be 988 at 3.25% 150,000

he told me he can give me a deal and knock total loan amount to 148,000 which sound like no deal

From my prespective , I would be best to work on my credit and work to make debt ratio better then refinance!  FYI I already have saved money so refinancing for a lousy 3,500 from having two months off seem like a rip off

Should I sell my duplex? Or refinance and hold

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