Refi, Cap rate, Am I doing this right?

Question

The original plan, and hopefully still is to cash out refi current home. I can cash out 90%. Currently owe 101k and would refi at 135k with 3.73% APR. Leverage equity into another property down the line after getting tenants. Reuse VA for a primary residence.

The Mortgage+ Tax&Insurance=$770 monthly

Projected rent $1100 monthly

Monthly total for later maintenance and vacancy 15%

$1100-770-15%=$3366

$3366/135k= 2.49% CAP ?!?!?!?!

Home is currently worth $150k

Did I do this right? Is it even worth it?

Please help.

Josh Williams · Answer

I was able to repost this in a few different threads. And finally got some good feedback along with reading Ben Leybovich's post on using rules for your investment analysis. Looks like a good deal, so we will run with it and if all else fails we have an exit strategy. It's not a daring move and it's simple, just the way I like it for being new to REI. Thanks for the feedback!

Dawn Young · Answer

a lot of houses are not worth it, when you have to finance the entire thing. In many years it would be paid for, or you could refi again, to get cash flow, but Personally, i can't ask myself and my husband to maintain it for free in the meantime!  Plus, if anything went wrong, We'd be in a loss!  Our rents are similar here, so my goal is $60,000 per door. At min, i want to make net $200 per door.  Honestly, i don't know how to get deals that low.  We got ours be owning the land, and putting used nice homes on them.  Others buy low and force the appreciation through work on the house, but that's a whole other game, and I'm nervous about it myself. Others get into duplexes, but  60 per door is low even for them.  Its also a matter of the market.  If it goes up, we'll all wish we would have bought more houses like that!