Cash Refinance from SFH for next rental purchase

[Mark-Anthony Villaflor]

It’s been awhile since I’ve done any sort of real estate investing so I’m just trying to see if I have this all correct. I’ve built some equity on two properties in Texas.

In 2014 I purchased a house with 20% down.

• 115000 original purchase price
• 86500 original loan
• I'm looking at doing a cash refinance and I believe the LTV for that is 75/25

My assumptions are:

• 160,000 appraisal
• 120,000 loan 80%
• 40,000 20% downpayment
• 120000-76,132.45 (current balance on existing loan) =43,867.55 cash

I’m looking at purchasing 1-2 single family rentals with the cash I receive.

What fees would I incur with doing a cash refinance with these numbers? For some reason I recall that a cash refinance like this would be $5000-7000 but can’t remember what this was from.

What considerations should I have moving forward? Or what strategy am I missing given this info? 

Thanks thanks in advance!

[Joe Villeneuve]

Originally posted by @Mark-Anthony Villaflor:

Originally posted by @Joe Villeneuve:

Originally posted by @Mark-Anthony Villaflor:

@Joe Villeneuve got those clarified by the lender! Thanks. 

After seeing the numbers, cash refinancing the will lead to a negative cash flow on both properties because the loan becomes much bigger. Is it still worth doing a cash refi?

 NO.  What are the numbers now?  Specifically what is the negative CF?  What was the positive CF before the refi?

Positive cash flow- 140 after PITI and a small contingency fund for maintenance.

Negative cash flow ends up being just under 300 after refi.

 Then a definite NO.

You would be losing money every year.  You would have put at least 70k (2 DP's plus refi fees)in cash (your money) that you would need to recover before you can count any income (CF) as profit.  Since you have a negative CF of 300/mo (3600/yr), you are falling further behind every year...meaning 3600/year more, every year, added to the dollar amount you have to recover first...pre-profit.

That means you would need to be able to invest your new cash from the refi, and get at least 3600/year from it, just to remain 70k behind.  I don't see this as a good thing...at all.  

Math is math.  Unless you can make 1 + 1 somehow not equal to 2, Negative cash flow is never good.