Refi, Cashout or Sell?

Question

Hi all!

I have property in Idaho that I'm moving away from. I intended on renting so I am considering refinancing only, refinancing for cashout or selling. Not sure what to do, looking for input. Details below.

Option 1) refi for lower rate only: this will allow for smaller payment so better cashflow on rental and property paid off in 27 years.

Option 2) refi for cashout: less cashflow on the rental but a good amount of money towards next house purchase downpayment and property paid off in 27

Option 3) sell: most money towards next house downpayment but no more rental property

Some background: newbie with two other single family rentals not including the property in question.

Goals: continue to invest to build wealth and trying to expand into learning about apartment syndication to replace current work.

What are you guys doing? Thoughts on my situation? Thank you!

Farrah H. · Answer

@Chris Davidson, @Benjamin Aaker & @Justin Phillips — thank you for the replies! I don’t know much about helocs. Will definitely look into it. I’ve tried my hand at managing from afar and it wasn’t too bad but it was also under different circumstance and can see how this can get difficult. Guess this is a good problem to have! Lots of good options. Thank you all.

Justin Phillips · Answer

My wife and I had this same dilemma with our property down in SoCal. We ended up ReFi'ing into a specialized 1st position Heloc, and we've loved it. It's allowed us to keep the property as a rental, while retaining access to equity. We've still enjoyed our cashflow, which is building equity that we'll write a check from for our next deal. We can also put our idle funds on our line, where they work tax free, 8x harder than any savings account we could get. I'd definitely recommend checking it out as an option!

Benjamin Aaker · Answer

You said you are a newbie investor. Managing from afar is very difficult and might not be something you want to get into. I usually recommend people to hold onto their property and refinance, but since you are moving away (and the market conditions are great for selling), you should consider selling and purchasing a new rental in your new city.

Chris Davidson · Answer

@Farrah H. I would sell and move more towards MF, with the direction towards learning more about multi deals and how that would help with the future goals of apartment syndication.

Either way sounds like you are going to do well. Best of luck!

Farrah H. · Answer

@Jason Wray Thank you for the response that's a great idea but what do you mean by only needing 3.5-5% down on primary homes? Is that for FHA or conventional? I looked at going the FHA route but the fees seemed really high so not worth it. I have a VA loan (0% down-ish) I can use but was considering leaving that open and doing a conventional loan on the next property. Thanks!

Jason Wray · Answer

Farrah,

Based on how hot the RE market has become and will continue to be I would take cash out before rates get a lot higher.  Tuck that cash away and pounce on the next RE deal that makes sense for your area and rent schedule.  Split the cash between the Primary and investment home purchase considering you only need 3.5-5% down for a primary.

Farrah H. · Answer

@Luis Vaca thank you for your input!

Luis Vaca · Answer

@Farrah H. I'd lean towards cashout refi and use the money on your next endeavor.

If the property is in good shape where you can reduce any future repairs and maintenance. The location is ideal and you get some great tenants in there, I'd keep it. You'll be sitting pretty in 10 years with rental increase, appreciation, principal paydown etc. Especially since Idaho seems to have an inflow of population lately.