When should I refinance my rental property?

[Max Emory]

Should you refinance that property in your portfolio now at 40% LTV?

How I currently solve this issue within my own portfolio is by asking myself these 2 questions:
1) Do I still meet my minimum cash flow requirement per door after refinancing the property(ies) with the new terms of the refinance loan?
2) Can I deploy the capital I pulled out to generate substantially more cash flow than I will lose by refinancing the property(ies) (based on higher loan amount and possibly a different interest rate than what the property currently has)?

If it’s a “yes” for both of those I may do it. That being said, your "risk tolerance" will weigh heavily in this decision making process. This is different for every investor.

Just looking at cash on cash ROI doesn't do it for me. If I refinance a property and pull all of the cash I had into it out, and that property cash flows $1/mo, that's technically an infinite return since I don't have any money in the deal. But...I'm not interested in collecting $1/mo from a property.

At the end of the day, run the numbers and make the decision that best suits your vision.


Simple Formulas for REO and CoCROI:
---Return on Equity = Cash Flow in 1 Year / Total Equity in Property(ies) * 100%
---Cash-on-Cash Return on Investment = Cash Flow in 1 Year / Money you have into the Property(ies) * 100%


How do you guys decide to refinance your rental properties (outside of performing the BRRRR method)??

I hope this helps!
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Real Estate Investor | USMC Veteran