Refinancing & Positive Cash Flow

[Matt Koury]

Hi Guys! I need some clarity on something. Upon analyzing a few potential deals, I noticed that the properties won't cash flow positively after refinance which makes me think I'm going wrong somewhere. If a property is bought all-cash and I refinance it, will the refinance be at the value of the appraisal of the property? Are there different loans I can get where I only pay down the interest etc? In other words, how do you find properties that still cash flow after refinance given that your debt service is at the value of appraisal of the property taking into account the average rent of comparables in the market? The properties I've analyzed don't compare favorably when I take into account how much rental income I receive in relation to the expenses of the property ... Any help is greatly appreciated!

[Joe Villeneuve]

All you've found out is the deal you are analyzing isn't a good deal.

All the cash you put in before you refi is your money that you've "spent".  Spending is when your cash goes in one direction. ..away from you.

When you refi, you're getting your cash back, so it turns it into an "expense".  Expenses are tools using cash whereby the cash is bi-directional...it comes back to you, thus you didn't spend it.

When you refi, and still cash flow, the tenant is paying the mortgage for you.  When you refi, and you don't cash flow, you are paying the mortgage...and paying the tenant to live in your property.

Money is a tool. and a verb...it must always be moving or it dies.  When it lives, it works for you, making more money without your help, and potentially has a "shelf life" of infinity.  When it dies, you worked for it, and must work for it again since it had only a "shelf life" of 1.