My parents are looking to sell their house in Arizona and move back to upstate New York. I figured this might be a good time to help get them their first rental property. The house appraised for 315k and they owe 199k with a $1,200 a month mortgage.. I have several people interested in renting the home for $1,900 a month. I have done some research on the BRRRR strategy and I am still trying to wrap my head around how to get a loan for the next property. Is it possible to refinance at a low interest rate? Or would it be better to take out equity for this particular opportunity? Any advice would be greatly appreciated! Do not want to let this opportunity slip by. :)
You could possibly refinance and make it cash flow even better depending on how far into the mortgage you are. Any rehab would probably be minimal due to the fact that your parents have been living in the property. If you take out equity my rough estimate is that your cash flow will be negative making that not the best option if you plan on keeping the property.
@Michael Rankert It looks like a good lender consultation could answer many of the questions. How strong are the parents, what is their ability to purchase the next house, what liquid capital do they have available, how much risk are they willing to accept?
The overall concept looks solid and definitely worth exploring! As an AZ Property Manager, I see many clients develop wealth via real estate and encourage you to explore this option.
Always happy to answer questions regarding the process, the property, the rental etc.
PS: Make sure the tenants are screened really well!!
Since this is mostly about the financials of the property, your first move is to talk to a lender to help understand all the options. Any lenders on here can throw in their two cents, but it's all really going to depend on your parent's finances and what options THEY will have... not just any option in general that might be possible to someone.
Would your parents be able to purchase a property in NY without using any of the equity from the house in AZ? If so, you might be able to just leave the property as-is and still get the deal done.
Really, it's going to depend how much money your parents were planning on using from the sale of their house. Let's just say they walked with $90k in their pockets if they sold... how much of that were they planning on using for a down payment in NY? Or to pay off other bills?
I would talk to a local lender here in AZ about the options with the current house, and maybe one in NY to know about their purchasing power there.
Basically you just need to look at all scenarios and see what's required for each to determine the best outcome, and then make it happen. Best of luck!
Thank you so much for such detailed and quick responses! I really appreciate all of the help!