I have owned a house, not my primary residence for 12 years.
Purchase Price = $108,250
Zillow Value - $130,000
Rate = 5.75%
Payment = $822/month
My disabled father has rented it from me for the last 7 years. He is on a fixed income, so he only pays $600 per month. Yes - I am subsidizing his house, which I am fine with and I can afford.
Chase is offering to refinance my mortgage, no cost to me, 4.5%, so my payment will be <$700/month.
1. Only refinance the balance of 75k and almost break even with rent.
2. Pay 25k on mortgage and refinance 50k. Have a small cash flow.
3. Take 25k, and purchase another property ( if I can find one ).
Thoughts on cash flow, taxes, etc... will be appreciated!
My thinking is this:
1. Pay 25k to reduce mortgage from $800 to $400 ( 20 years @ 4.5%). This is pure cash flow of $200/month, ( or $200 reduction + $200 I have been paying = $400 ).
2. Use 25k to buy another property (if I can find one ), fight with tenants, for the same cash flow.
3rd is good option so you can have another investment from this equity.
@Alan Hicks - What are you looking for? If you're looking for effortless cash flow, then paying down the mortgage makes sense.
If you're looking for a high return on your investment, appreciation, and cash flow with a little bit more work then the rental property makes sense.