Ideas on refinancing my rentals for better cashflow

6 Replies

I have been searching some local small banks for refi rates on total cost and rates.  

My idea is to go conventional loan for 20 year or 30 year. With no money out of pocket.

I have a duplex that I purchased for $155,000 and now the balance is $129,000.  

The rates I have been getting are 4.75% to 4.25% with the closing to around $1500 and $2500. 

My thoughts are its better to pay more on closing and get a lower rate in interest.  I am also hoping the 20yr fixed will give me a bit more cashflow and go with it.  So if needed later down the road I could refi for a better rate if needed.

If you do not need the money to live on, then I would pay off as soon as possible.

Well I do in fact need to money to live on.  In fact our idea is to hire a property manager to cover our properties.  I also need to make some income from it.  Right now I am only cash flowing $200.00 a month without management fees. 

With your loan-to-vaue between 80% and 85% (excluding any closing costs), your options are going to be somewhat limited.  Find the best option(s) and make an assessment about the viabiity of refinancing by looking at the following:

1. How much is cash-flow improved each month?

2. What am I saving in interest over the life of the loan relative to my curret rate/term?  How does this compare to the $1500 - $2500 the refinance is going to cost me?

The best cash flow is going to be with the 30 year loan when comparing the 30 year vs. the 20 year.  As @Sam Elder stated, you're not going to find many loans that go over a 75% loan to value (LTV).

Originally posted by @Brian Johnson :

Well I do in fact need to money to live on.  In fact our idea is to hire a property manager to cover our properties.  I also need to make some income from it.  Right now I am only cash flowing $200.00 a month without management fees. 

 This being the case I would definitely pay more down at closing to get the cheaper rate.

Remember your 1500 to 2500 usually covers bank fees (processing, underwriting, credit, appraisal) but you'll probably have some more third party and prepaid costs as well : Title, escrow and transfer taxes, as well as prepaid interest and impounds of property taxes and insurance. Make sure you get a true bank good faith estimate for all your charges so you know what your costs are/will be.

If you need the property to maximize cash-flow, then you should opt for a 30 year loan. Historically rates are extremely low still and you don't want the higher payment of the 20 year loan. Set up bi-weekly payments and you'll typically pay off your loan in 23 1/2 years. When can, add an extra payment if you want to pay down early, but I would save the cash for down-payment on your next property.

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