refinance or sell condo with a lot of equity

[Leo M Christensen]

Hi everyone.

I would love to hear your opinion on the following case:

I have a condo, that i bought in '09 and the market has appreciated a lot since then, plus I've renovated it quite a bit. It's a very popular area and it rents out very easily. However, it has fairly high HOA fees so the cashflow after all expenses is about 440$ pr. month, which is not bad, but I'm currently paying interest-only on the mortgage. The interest-only option runs out in about 2 years.

My dilemma is that I have, do to the appreciation, a good deal of equity in the condo (around 175.000$ after tax) which I would love to reinvest, but I'm have a hard time getting a refinance do to debt to income ratio. 

So should I: 

- sell and take my short term profit and re-invest in an area that is not so hot, but i might get more units?

- hold and keep trying to refinance, thus betting on the market to hold the level it's at now?

- Do nothing and keep the cashflow as is, and the try to find another mortgage company when my interest-only period ends?

- or a fourth option, not mentioned above?

I look forward to hearing your thoughts

Kind regards 

Leo

[Cody Cook]

Leo M Christensen lots of variables to consider since I don't know the market you are in. Personally, I would probably cash-out re-if and continue to rent the property. This allows you take advantage of the low interest rates and lock them in long term. There are a couple assumptions that are necessary to support this strategy.

1. You can still cash flow the property with a 70 to 80% LTV refinanced loan
2. You feel the the condo is an attractive rental long term for your market
3. You feel the market is over all solid (meaning there could be more room to appreciate or even if the market dips in the near term, you would be confident that it would bounce back in the long term)

I have a couple properties like this that are locked into favorable long term rates. I'm hesitant to sell because they cash flow easily and I feel they are in great locations for the long term. If the market collapses, I'll still be able to rent these properties and they are located in areas that would appreciate once the market improves down the line (if/when it drops). However, you should always consider if there is somewhere else I can put my capital that could get me a better return.