Cost of doing business?

Question

Hello All,

I have been dabbling in real estate investing for a few years, but have not grown at the rate I would like, mainly because I work out of the country. I currently have 3 houses; 1 owned free and clear, 2nd with a small mortgage ($20K), and the 3rd I only owe about $1800 on. The property I owe $1800 on is worth approximately $80K, so I have been looking into doing a cash out refi for a cash injection to help with the purchase of more properties, but I feel that the closing costs are excessive.

My question is, is there such a thing as too much to pay in closing cost/prepaids for a refi or is it just the cost of doing business? I understand that money costs, but I don't feel comfortable with 10% of my added debt being money for cc & prepaids. Am I looking at this wrong?

Full Disclosure: I have other cash reserves, so the point of the refi is to be in an even stronger cash position and make my investments work for me, instead of dipping into my personal savings. Maybe if I didn't have any money, this would be less of an issue for me. Should I just address this transaction as if I have no other money to grow with?

Thank you in advance for all responses/guidance.

Joe Villeneuve · Answer

You're looking at it wrong.

1 - Whatever costs go into a mortgage, that is buried in the mortgage payment, isn't paid by you...it's paid by the tenant...as long as you have positive CF.

2 -  If you have $0 cash right now, and you refi to pull out $100k...but you only get to keep $90k, and the cost of that $90k is paid by someone else (see #1)...what's the problem?

3 - Are you familiar with the expression, "Stepping over a dollar, to pick up a dime"?

Rod Smith · Answer

All great points @Joe Villeneuve and the kind of reinforcement I needed to hear. Thank you

Joe Villeneuve · Answer

What you have an opportunity to access, is a form of free money...if you "use it", and don't "spend it".