Converting residence to SFR?

Question

I'm going to be moving out of our home soon and trying to decide between selling or keeping my house as a rental. I'm currently about 2 years into a 30 year mortgage at 4% fixed. The market value of the house is about $280k, and I owe $237k on the loan. The house should rent for ~$2,000/mo. My question is how do I analyze this "deal" being I already have the home purchased? Do I look at it as if I'm purchasing the home for $280k with $43k down, or use the loan info from when I first purchased the home? I currently own one other rental that used to be my home, but I kept that one for lack of options and did no analysis beforehand. I'm trying to go into this one more prepared. I appreciate any advice you all have.

Matt Moldenhauer · Answer

Hi @Richard Mahn. This is what we just did:

Primary residence that will turn into a rental in a year. Purchased 5 years ago for $100,000 @ 4.5%FHA loan. Refinanced it for 30 years @ 3.75% (since it's still our primary we got a better rate) and it appraised for $118,000, giving us our 80% LTV needed to drop PMI. We are saving $148/month by doing that, which will increase our cash flow next year when we turn it into a rental. Is this going to be the best cash flowing property? No, but i believe it's still a good investment because when I purchased it I put about $1,500 cash down on it. Refinance closing costs were rolled into the new loan and PMI I was dropped. The COCR is pretty good if you ask me.

If you're going to try and refinance to improve cash flow, do it now while it's still your primary or you will pay more and need a 75% LTV.