Strategy question on cash-out refi for several properties

[Andy D.]

Hello BP world!

Looking for some input on 2 aspects: let's assume I have 2 Condos held in my own name where I want to do a cash-out refi (conventional/conforming) to use that cash to buy more properties.

Current cash flow on both units is excellent, covering everything like HOA, maintenance, vacancy, etc etc. and leaving a nice surplus.

1) My lender has asked if I would not want to do only 1 refi with the maximum possible payout, rather than 2 with a lower amount each. Reason? Cost of course. 1 refi vs 2 refi costs. Makes perfect sense and would save me a nice chunk of money, obviously. However, it would completely screw up the figures for the property which would then be refinanced.

Overall it would not change the figures much when looking at those two Condos and their cash flow/costs combined, though. As a matter of fact, it might actually be even slightly better re cash flow if I only refinance one when adding all the figures and dividing them by 2.

It's not commercial, so the DSCR on the property doesn't matter (much), and since I do have sufficient cash flow from other units to cover the "lack" of sufficient income from the refinanced property I'm wondering if I should go that route of doing only 1 refi.

Then again, assume that I sell all my other investments (not gonna happen) then I would have a problem if I kept only that one unit with insufficient cash flow. It would still be netting some say $100 cash (after HOA dues paid), but only when leaving aside maintenance, vacancy, CapEx etc.

What's your opinion on this?

2) Lender has given me several options/scenarios with different interest rates and therefore different loan origination fees. The cheapest interest rate would result in the highest costs but of course the lowest monthly (new) payment. Half a percent higher reduces the costs by some $1200, while only increasing the monthly payment by some $50. However, the interest portion is, of course, quite a bit higher in relation to the cheaper interest rate loan. The third loan would be another 25 basis points higher with again lower loan refi costs and some $30 higher monthly payment compared the one with .25% lower rate.

Interest payments are fully tax deductible. I'm in a very high tax bracket and have a significant tax bill due to my W2-income. Any deductions on my rental income save me money in tax payments, somewhat offsetting the fact that a higher interest rate simply is indeed a (higher) cost. I can't do the math myself, but my gutt tells me that a slightly higher interest rate, leading to higher tax deductions while at the same time reducing one-time refi costs will be more beneficial than aiming for the cheapest rate.

Any thoughts?