I've read some awesome analyses of RE deals on these forums, and hoped some folks might give me their take on my situation, help me understand what my return actually is, what options make the most sense...
I bought a new home last summer as a primary residence (foreclosure - great deal). I've got a great tenant in my previous home, who I'd initially thought would buy the house after a year, but now seems content to rent for another 2 years or so. 100 year old historic home in a great location. Moderately restored, but furnace replacement and some roof work could be imminent.
Purchased home for $120,000 in 2010, invested about $60K in rehab over the years.
Current MV ~ $255,000.
Mortgage liability: $91,000 @ 3.65% (30 year fixed)
HELOC balance: 25,500 @ 5.2% (floating rate)
Paid off $20,000 of HELOC w/ 15 mos 0% interest credit card - current balance is $19,200.
Also owe $46,000 to my 457(b) plan. $395/month paying 5% interest (to myself).
I mention these liabilities because I used the HELOC and 457b loan to put 20% down on my new home.
House payment is $750/month (incl taxes and insurance); Receive $1695/month in rent - top dollar for this area.
Because of all the payments on these loans associated with houses, I consider my cash flow about $250 on about $75,000 equity. Am I thinking about this right?
Because of all the moving parts here, I'm having trouble sorting out what my return is, and whether I should sell the house this coming summer. Like I said tenants are great, and don't want to move. Tight housing market with ~5% appreciation. I like the idea of just selling it, simplifying my finances, investing in broad market index funds. But I also like the idea of holding onto a good deal if it is one...
Thanks in advance for any insight ya'll may have!
@Mitch Moore For sake of time, this is way too complicated for one property. It almost seems like stepping over bills to pick up cents. Why not just refi 204,000 on 30 year at 4% (80% of LTV) 973.93 house payment plus 335ish taxes and insurance it sounds like and then cash flow $387 dollars a month. After you pay off all the underlying debt of 181,700 you have 22,300 to play with for free so your cash on cash return is infinite because that $387 cash flow is assuming you get all of your down payment back plus a 22,300 payday, and then you can stop trying to keep track of what loans to pay.
@Casity - thanks for the response. The various loan payments are automated, so it's not really a thing to deal with. Certainly what you propose is simpler. If I decide to keep the house long-term, then I'd definitely do a refi.
Could you elaborate a bit on this...
"After you pay off all the underlying debt of 181,700 you have 22,300 to play with for free so your cash on cash return is infinite because that $387 cash flow is assuming you get all of your down payment back plus a 22,300 payday."
Specifically, the cash on cash return being infinite. I don't know what that means. Why does $387 cash flow assume I get all my down payment back? What, the 20% equity I leave in after a refi?
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