refinance or cash out???

[N/A N/A]

Hello all. I just have a quick question. I currently have a property worth $124k and the current principal owed is about $58k. The current mortgage is about $600/mo @ 6.8% and the rent is $725/mo. Would it be a better option to refinance for $58k and take the lower mortgage, or refinance and cash out and deal with a higher mortgage, possibly reducing the positive cash flow?

Thanks,

Parallon

[Jon Holdman]

Per numerous other threads, expenses run 50% of rents. So, NOI on this would be $362/month. If your mortgage is $600 a month, your losing $238/mo. So, you don't really have any positive cash flow. You may not have noticed yet because maybe you're managing it yourself (earning the property management fee of about $75/month) and doing maintenance yourself and avoiding (so far) big sporadic expenses like paying for a new roof or fixing the damage after an eviction.

If you refi to 30 years on the $58K, you could get the payment down to about $385, making it only a little worse than break even. If you pull cash out, you're going to make your monthly loss worse.

A property that is worth $124K and rents for only $600/month is a bad deal. Why not sell it and find a better deal? Even it you took the net of about $56K after the sale, and put it in CD's at 5% you'd be getting $233/mo instead of losing $238/mo.

Jon