Have 3 properties, how should I refinance this for maximum cash flow

2 Replies

Hey everyone. My mother owns a home and two 4-unit townhomes. 

Current situation

4-unit townhome 1: principal remaining $523K @ 6.625%. Maturation date 12/36. Rent collected ~6500/month

4-unit townhome 2: principal remaining $163K @ 6.25%. Maturation date 1/18. 

Rent collected ~6500/month

Home residence: Priincipal remanining $91K @ 5.375%. Maturation date 12/17

I was thinking of refinancing the 4-unit townhome 2 and lower the interest rate and use that cash to pay down the 4-unit townhome 1. Perhaps also keep some cash to put down for another property. What would be the best way to go about this?

Thanks! I love BP

Originally posted by @THANG BUI:

Hey everyone. My mother owns a home and two 4-unit townhomes. 

Current situation

4-unit townhome 1: principal remaining $523K @ 6.625%. Maturation date 12/36. Rent collected ~6500/month

4-unit townhome 2: principal remaining $163K @ 6.25%. Maturation date 1/18. 

Rent collected ~6500/month

Home residence: Priincipal remanining $91K @ 5.375%. Maturation date 12/17

I was thinking of refinancing the 4-unit townhome 2 and lower the interest rate and use that cash to pay down the 4-unit townhome 1. Perhaps also keep some cash to put down for another property. What would be the best way to go about this?

Thanks! I love BP

 HI Thang,

4 unit town home 1: cash out on 4 units even with 1-4 financed properties is max 70% so it depends on what market value is for this fourplex.

Rates for fourplexes right now are in a much lower range so you could benefit from the spread in rates as your current rates are about 1.75% higher than current market 4 plex pricing.

Gaining 1.75% - 1.875% in rate you could redirect that cashflow to other more productive uses or lifestyle improvements.

Cash out on 4 plexes is maxed at 70% (conventional fannie mae/freddie mac). There are some business/commercial banks who will lend you up to 80% but the terms will not be as favorable as 30 year fixed Fannie/Freddie money.

It sounds like you have an opportunity to obtain up to  70% on the 2nd 4 unit.

On primary residence there are opportunities to obtain up to 80% on a first loan and combined with a 2nd line of credit opportunities to obtain up to 90-100% of your home equity if you so choose. 

As long as things are planned efficiently and the money is put to productive use with contingency plans you can create additional opportunities.

Good Luck!

Medium new american funding logo  Albert Bui, New American Funding | [email protected] | 949‑514‑5106 | http://albertbui.com | CA Lender # 345453, WA Lender # 345453, TX Lender # 345453, TN Lender # 345453

Hello Thang

One key factor in determining which loan should get priority in principal reduction over the other is the overall value of the property. Your LTV ratio will primarily decide what your rate will be. The higher the threshold of your financed amount in respect to the property value, the higher the risk for the lender. The higher the risk, the higher your interest rate will be. One thing is for certain though, your rates are rather high compared to the market norm, that means you definitely will benefit from a refinance. I would suggest you refinance as soon as possible and lock your rate into a 4-something fixed and hopefully never touch the loan ever again. In this situation though since you're giving us some very general numbers, you cant really expect anything more than just general advice. The best way to go about this would be to talk about your goals both short term and long, and then decide what you really want to do.

The important thing to ask yourself is "what is my opportunity cost?","what is my true cost of money?", "is the market in a place where i can purchase at a good price and are the gains from my new investment worth the potentially higher rate or mortgage insurance i would be paying on a highly leveraged loan?"

There are many more details and factors we would need to know in order to truly give you the most sound advice and strategy. Usually in these situations we would take a full application and walk through your scenario together. One thing is for certain though, your rates seem to be on the higher side and they definitely could use a refinance.