How to get to the next property

[Jacob Krum]

Hi a few months ago my sister and I found a private lender who gave us a 5% interest rate granted we put 30% down on the property and pay it off in 7 years. We fixed it up some and now I estimate we have about 40% equity. With the current loan terms we are cash flowing -120 each month due to the 7 year pay off period. Should we refinance or push through given the good interest rate? My sister and I both have good full time jobs and can support. However, I'd like to find another deal. Would it be a bad idea to refinance and put that money to the next deal which we would BRRRR? I told the private lender of my idea to refinance and pay him back immediately and then take out a new loan with him for the next deal. However his response was for us to just keep this existing loan and put our refi money to the next deal. What are your thoughts, is one option better than the other? Thank you in advance!

[Dominic Mazzarella]

Quote from @Jacob Krum:

Hi a few months ago my sister and I found a private lender who gave us a 5% interest rate granted we put 30% down on the property and pay it off in 7 years. We fixed it up some and now I estimate we have about 40% equity. With the current loan terms we are cash flowing -120 each month due to the 7 year pay off period. Should we refinance or push through given the good interest rate? My sister and I both have good full time jobs and can support. However, I'd like to find another deal. Would it be a bad idea to refinance and put that money to the next deal which we would BRRRR? I told the private lender of my idea to refinance and pay him back immediately and then take out a new loan with him for the next deal. However his response was for us to just keep this existing loan and put our refi money to the next deal. What are your thoughts, is one option better than the other? Thank you in advance!

If you're comfortable with the monthly cash flow hit and your goal is to scale, pulling that equity out and putting it into a BRRRR deal might make a lot of sense, especially if you're confident you can force appreciation and refi again later. The lender's suggestion to keep the existing loan and just use your refi money on the next deal isn't a bad idea either, since it preserves a good rate and avoids a reset. Really just comes down to your risk tolerance and how aggressively you want to grow.