Buying Down Points

[Tony Thomas]

Any best practices around buying down points?

I'm considering a cash out refi. 70% LTV on a property that will likely appraise around $450K. I can buy down the interest rate. It would cost me $13,835 to get down to 6%, which would give the best value over the course of the loan.

Why wouldn’t I buy down all the way to a 6% interest rate? If not down to 6%, where would you buy down to?

[Ko Kashiwagi]

The breakeven math is very important and I think it also depends on your cash needs. If you can make a better return by using that cash on a different deal & you're in the "growth phase" most investors wouldn't buy it down because they would prioritize acquiring more properties over maximizing cash flow now.