Am I ready to refinance and buy my next rental?

Question

Hello all,

Two years ago I purchased a SFH for 210K. Renovated for 35K. Have it rented out for 1900/mo since then. My monthly payment is $1550/mo. We have about 5K in reserves. My current interest rate is 7.4.

There is another home that would be nearly an identical rinse and repeat in the neighborhood. I would purchase for around 220k. From my lender estimates, they would give me roughly 6.5 on the refi but taking another 70K for DP and reno for the 2nd home would put my monthly at around 1800/mo.

If these numbers are accurate, would pursuing it be too aggressive given the small delta between the new potential monthly payment and current rent?

Ricardo R. · Answer

Hey Jacob,

You’re clearly thinking like a BRRRR investor — rinse and repeat — but you’re right to pause and look at that cash flow margin before pulling the trigger. Let’s break it down:

1. The numbers are tight.
If you’re pulling $1,900 in rent on a new $1,800/month payment, that’s razor-thin — especially with today’s taxes, insurance, and maintenance costs climbing. You’d basically be betting that appreciation and rent growth make up for low or break-even cash flow early on. That can work, but it’s not ideal if your reserves are thin.

2. Your reserves are the real limiter here.
$5K isn’t much cushion — one furnace, AC, or vacancy can wipe that out fast. Before you take on another property, I’d want to see at least 3–6 months of total expenses per property saved. You’ll sleep way better, and it keeps you from being forced into bad short-term decisions.

3. Interest rates and timing.
Yes, 6.5% is better than your current 7.4%, but not by enough to transform your numbers. If you can refinance the first property and pull cash while dropping your rate and payment, that’s worth exploring. But if the new deal only breaks even after debt service, I’d slow down.

4. BRRRR still works — but only when the “R” actually returns your capital.
If the refinance on the first house frees up real equity and still cash flows after the new rate, great. But if you’re just layering on another high-payment loan to chase a slim margin, you’re growing exposure faster than your safety net.

My Advice: the deal itself isn’t terrible, but your reserves are the choke point. Shore those up first — even $10–15K more gives you breathing room. Once you’ve got that buffer, rinse and repeat will feel a lot less risky; Jacob I really hope this helps you, I sent you DM on BP, its one of the reasons I do this, I hope you can assist.

Jay Hurst · Answer

Ok, then I would not touch the current house adding to your current mortgage. I would take out a rehab loan on the new house. If the ARV is 325k (and it seems that is on the low end) then you can borrow 243,750 on that property.   Once you finish the job your refi into a 30-year fixed. You accomplish all the same things without jeopardizing your cash flow.

You could always set up a HELOC on the first property if you needed a bit more cash, but it is much easier to pay back 25k on a HELOC to take away that payment then it is to pay back a 250k~ mortgage.

You could still refi the House A first mortgage too as a rate/term refi will be a better rate then a cash out, but this would LOWER your payment not up it.

Jay Hurst · Answer

You mentioned yoy purchased for 210k, and put 35k into house A, but what is it worth today?  and what do you owe?  These answers will determine how much cash you can actually pull from House A.

Kate Nixon Taylor · Answer

I would say it depends on your income and priorities. If you are able to cover expenses that come up with your income and are a more aggressive/risky investor, then you might be ready. If your budget doesn't allow for that, I think its a little tight. You don't want to put yourself in a place where you are going into debt for an emergency or something. I would keep more in reserves than 5k per property, and if your income doesn't make up for that, I would wait.

Jacob Bremer · Answer

Same house except this has a fourth bedroom. So 325K+ If I need another 10 or 20k for renovations, the lender said it would be no problem. Barring any surprises I expect my renovations to be around 30K-35K again.

Jay Hurst · Answer

ok, the next question would be what do you expect the ARV of the new property to be?  I assume you were thinking about putting 20% down, which is 44k, so leaving 26k~ rehab budget?

Jacob Bremer · Answer

325K conservatively. Remaining mortgage is 150k, so I'm not concerned, plus already got the green light from my lender.

Nicholas L. · Answer

@Jacob Bremer

you got a bunch of AI responses.  i'm a real person, with real questions.

you mentioned 70K for down payment and reno.  would you then refinance - making it a BRRRR - or does your 70K just sit there?

if the question is "should I shell out 70K to be negative every month forever" then i'd say - no, i don't see how that advances you financially.  but if i am missing something let me know.

my goal is to break even with as little net outlay into every deal as possible.  if i have to put 20+% down and then just have that stuck in a property i won't do it - the returns don't justify it and i don't have the capital for that.

hope this helps.  happy to dialogue further.

Erik Estrada · Answer

What's the ARV of the new home and will you be financing the purchase and renovations?

Elealeh Fulmaran · Answer

It’s tight, but not dead. Only move if the new payment is near current rent and you can: raise rent to a justified market number soon, maintain positive DSCR under conservative taxes/insurance/vacancy, and hold 6 months of reserves after closing. Widen the spread by negotiating seller credits or rate buydowns, reducing cash-out to lower P&I, or using seller financing/interest-only for 12–24 months. Always verify current rent comps and taxes, and run a stress test. If the numbers don’t create a margin now, pass and wait for a cleaner deal.

Am I ready to refinance and buy my next rental?

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