Mortgage refi question for potential future rental

[Zenus Wilson]

First time forum poster, long time podcast listener. I have yet to step my foot into real estate other than some small crowdfunding and REIT funds—primarily focusing on career advancement/income and stock market investing.

I'm hoping I'm posting this question in right category of forum, but I'd like some advice regarding a VA loan mortgage refinance. Primary residence balance of $491k at 3.75% with 28 years left. With rates dropping I can get 3.25% interest rate for a 30 year mortgage with $2900 in closing costs—breakeven would be in 11 months with approx $200 freed up in cash flow. My thoughts were to look at lowering the monthly payment as we are hoping to rent the unit out when we move in 2 years. Right now with current market rent and expenses it would not break even. With the refinance it's not quite but very close to break even with rent appreciation in 2 years. Our location is highly desired in San Diego with extreme walkability to grocery stores and several popular restaurants and so we'd like to hold if we can make the numbers work better. There's a strong likelihood we may also have my parents move in to the unit further down the road. Does this make sense to pay the upfront costs or should we wait for a better refi vs consider selling in 2 years.

[Zenus Wilson]

@Tim Herman

Familiar with 50% rule. The location is San Diego so it almost is never a 1% rule/50% rule kind of area. We also only financed with 5% down (VA loan) so really need more equity in the property before we would see any appreciable cash flow. I do believe it has a good chance for cash flow as the area continues to be highly desirable but I don't think rents will be $4k in two years...maybe low $3k. I understand this is partial speculation. Thanks for the input!