Currently have a single family home that I contemplated turning into a rental.
Current loan is 2.625%, 74k owed, with a $521 mortgage payment. House is worth about $95k. House will probably rent for 750/mo. My 15 year mortgage puts this deal in a tough position
My options as I currently see it are
- Rent as is and realize negative cashflow
- Refinance to 30 year loan, (4 ish interest rate) but lower monthly payment
- Sell house and look for other investments
- Pay off mortgage balance to own property free and clear
Advice on how to proceed? What are my best options?
Investor · Palm Beach County, FL · Member since 2019 · 370 posts · 330 votes
5y
Hey Tyler,
Yes, paying off that mortgage would bring you positive cash flow but do you really want to dump that much cash without utilizing any leverage? Where is the property? If it in an area with excellent appreciation then it would be worth keeping the minor negative cash flow with the expectation that the rent/value will rise considerably. I don't think that a refi will reduce your monthly mortgage payments considerably.
@Ryan Cleary No I didn’t want to sink that cash, but also wanted to list as an option to see if anyone thought a payoff was preferable to negative cash flow. I think I can get a payment near $370 on a 30 yr
@Caleb Brown I didn’t think enough about the financing because it was my primary. Now I see the issue with the 15 yr and wish I had gone with a 30.
The area is growing but not a high appreciation location