Long Term Rental Property Refinancing Frequency

[Wade Luhman]

What is a good general strategy for thinking about when to refi a rental property to pull out equity that you can use to continue to scale your business? Are you doing it based on time and the current financial product you have? Or when you hit a certain equity amount? I understand the real answer is “it depends”, so I’m not really looking for that. I’m closing on my first property in a month with cash and plan to finance it after that to pull my cash back out for the next one. I like the comfort of a 30-year conventional, but in reality, I expect to refi well before the 30 years is up. I’m currently thinking a commercial loan with a 7-year fixed rate and a 25-year amortization and just refinancing before the 7 years is up.Thanks.

[Kyle Potswald]

Quote from @Robin Simon:

Right now, the advantages of getting a shorter fixed rate loan (either a true bullet commercial loan or something like a 5/1 or 7/1 ARM) aren't really advantageous and the savings on rate are really low (you might for example only be looking at like 15-25 bp lower on interest rate vs. 30-year fixed) so getting the 30-year fixed is probably best for optionality and in general. Also, if your properties are in Minnesota, there is no prepayment allowed on 1-4 unit properties even on commercial loans so you can prepay at any time or partially along the way on a psuedo-25 year amort if you'd like.

Don't know your specifics but I'd guess that getting 30-year fixed rate financing is probably your best bet and allows you to pursue any strategy you'd like over the course of the loan

You can charge pre-payment penalties on 1-4 family in MN.