Selling, Renting or REFI in this market

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Selling, Renting or REFI in this market

Jonathan Hudak
Member since 2018 · 7 posts · 0 votes

I'm basically a "Pre-newbie". Have been following Bigger Pockets for a while and am looking to get started in Real Estate in some fashion.

My wife and I currently live in a condo that we own (bought for $255k, currently owe $165k @ 4.05%) and the current value seems to be between $300-320k and has never been higher. We're in an expensive market in Fairfield county, CT. 

We're currently weighing options:

1. Selling now and moving on with our equity to buy a new place

2. Buying a new place now and renting under our current mortgage. Cash flow here seems tighter; $100-150/month if we hit expected rent.

3. Refinancing to new 30-year fixed (would be 2.85% w/ 6100 closing costs rolled in), with the goal of buying a new house and renting the condo out in 6 months-1 year when/if the market softens. The number seem to work out to a palatable cash flow of 300-400/month with this refi and lowering our payments, after accounting for capex/repairs and not including property management. We did consider a 20 year REFI option but with the extra payments the cashflow is much smaller, and the 30 year with extra payments came out very close in terms of total $ saved over the life of the loan, with the added flexibility and smaller minimum payments.

Looking for any feedback or suggestions as someone who's just getting started a little later in life (37)!

-Jon

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  • Kathy Pomeroy
    Member since 2020 · 6 posts · 1 vote
    6y

    Ok, first of all, the interest rates have never been lower.  Great time to refinance.  I am a Keller Williams agent, and there is a little known division of Keller Williams called Keller Mortgage.  They do mortgages with very low fees.  As far as I know they will work with anyone, not just buyers, sellers and agents.  Find a Keller Williams agent locally, or google Keller Mortgage.  They have no offices, it's all on line.  You should be able to get a great rate and payment there.

    You could either take a little money out with the refi to invest, or go for the lower payment, and get an equity line as a second mortgage for use as a down payment for a second property or other investment.

    I also learned this recently:  Life Insurance.  Maybe you need life insurance protection and maybe you don't.  But you can BORROW against your policy for very low rates, like 3% or so.  That is a great source of funds to invest.  

    Also, you will need reserves of preferably six months living expenses to qualify for most loans. This can be in a Roth IRA account, invested in things like mutual funds that can be liquidated easily. You pay taxes on the money before you put it in the account, so you can withdraw without tax consequences. Figure what it costs for you and your wife to live for 6 month, save that up, and put it in the IRA. There are limits about how much you can put in the IRA each year, so if you have more funds to invest, open an on-line brokerage account (I like T Rowe Price).

    Good luck!

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  • Brandon RushPro Member
    Real Estate Agent · Portland, CT · Member since 2019 · 761 posts · 849 votes
    6y

    Hey Jonathan,

    If you are looking to get into REI, option one probably your worst. Having that much equity and locking it up in a new (assuming) single family residence, in this expensive market will most likely set you back a bit, unless you have other funds ready to deploy for investments. While you may get good money for your current property, if you remain in Fairfield County you will be paying a premium+ for your new property.

    Have you considered house hacking in any way? Maybe purchasing a 2-3 family and living in one of the units? While the Fairfield multi family market is hot, it is possible. Obviously this is decision is based on what you and your family are willing to commit to.

    Another option if you and your wife are ok with staying in the condo is refinancing and using that re-captured cash to purchase a multi family rental property. This is really based on your REI goals.

    Just my 2 cents for options. Good luck!

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