refinance or not to refinance

5 Replies

I bought a 3 unit apartment for 138,000.

My return is 1200 with all experiences payed.

I rehabed it and is now worth 215,000.

Should I refinance to buy another property, and get a way lower return or just save money to get another property and keep the 1200 cash flow.

Hi @Jesus Jaramillo ,

How would you have a lower return? If you are doing a cash out refi, you should have less money in the deal, and most likely a higher cash on cash return. Maybe you mean lower cash flow? But cash on cash is calculated as your cash flow divided by the cash left in the deal. 

Your property is now worth $215k, right? Assuming you can get a cash-out refi at 80%, the bank will give you a loan of $172k. So if you bought at $138k, and if your rehab was less than $34k, you would have all of your money out, which would give you an infinite return, as long as the property still cash flows. If you’re cash flowing $1200/mo, the difference in your payment won’t use all of that up. Does that make sense?

@Jesus Jaramillo yes, the only thing is that I got a loan off the bank I put 12,000 down and rehabed myself for 8,000. I feel if I refinance it will only leave me with like 600. I want to get a 4 plex next and I have enough money for a down payment but I haven’t gotten to where I have enough money to do a’s my first property.. o and thank you for responding. What would you suggest if you don’t mind me asking.

I suppose it depends on your goals. If your goal is cash flow and you have lots of money to invest in other properties then you can do that.

However I'd take a look at your cash on cash for both. You can redeploy the funds you currently have in the property to buy another property, maybe even a larger property than you're planning on. That's exactly what BRRR'ing is. It gives you the opportunity to have cash flow with no money in the deal. Like I said, infinite cash flow. Then you can use that money again on another property, rinse and repeat and you're BRRR'ing!!

My personal advice, and what I would do, is refinance and go buy another property.