All Forum Posts by: Neel Sheth

Hello BP comunity!

We need some advice to understand the next step in our REI journey. Experts here might be able to analyze our situation better and giving this a shot.

We started our REI journey in Jan 2019 - Purchased a 1B1B condo in a co-op in NJ with a fully furnished basement and renovated floors, kitchen and appliances with smart switches throughout the unit ($63K as 20% down for a 15yr mortgage at 4.25% fixed rate). We borrowed $252k. Unit is 54 years old with around 150 1B1B and some 2B2B units in the community. There are only five other similar units with this layout in the community.

Since this is a co-op, finding lenders was not the easiest of tasks. In Nov 2019 we decided to refinance with our existing lender, to a new rate of 3.625% for 15 yrs and the new loan amount was $245k ($3K of the closing costs rolled into that new mortgage).

Me and my wife will probably find new jobs in a different state in a few years (around 2023-2024) and move out. We would like to keep this property as our first rental unit. As of now similar units are renting out at $2300 in this community. Our monthly mortgage + HOA comes to 2566 ($800 HOA includes property taxes + heating/hot water since this is a co-op). We realize now that borrowing with a high monthly payment was a huge mistake (twice) considering the rent value of this unit down the line.

Four options are in front of us: 

1. Do nothing and sell when we move. Saving us the 5000$ of closing costs and the point we plan to pay for a 3.25% rate on a new 30yr mortgage which brings the payment down to around 1000 a month.

2. Do we refinance into a above defined 30yr mortgage since only in then the mortgage+HOA payment will be covered with a rent of approx $2300 (assuming rents remain stable). Four square analysis shows 3.32% CoC and 5% cap rate using a a PM. I am leaning into this option.

For the four square analysis "Downpayment" amount at end of 2023 I have used this amount: 

(20% Downpayment paid at purchase in 2019 + Total payments made towards the principal 2019-2023)

3. Refinance now to bring cash savings each month into our pockets moving those into other investment types and and sell this unit upon leaving the state and invest elsewhere?

Appreciate any advice! Thanks!

We purchased a 1b1B w/basement co-op unit in NJ in Jan 2019. Loan term was 15 years. We refinanced (15yr term again at a lower rate) in November 2019, since the rates had dropped significantly. We plan on living here for the next 3-4 years and then renting it out as our family grows.

I realized we should have kept the monthly payments low in order to have some positive cash flow when the place is rented out in the future. Now we plan to refinance to a 20 year loan in order to reduce monthly payments, since rates have further lowered. Is this a smart move to refinance a second time within the first 2 years if buying the property?