Your Low Interest Rate is Killing Your Rental Property’s Cash Flow

[Chris Lopez]

Real estate investors!🚨 I've just dropped a new video on the BiggerPockets YouTube channel that dives into a fascinating real-world scenario.

Here's the situation: A BiggerPockets member owns a $1.7M property in Silicon Valley. Sounds great, right? But here's the twist: 🔄

•Purchased in 2014 for $823K (talk about appreciation! 📈)
• Current rent: $4,500/month 🔑
• Loan: 30-year fixed at 4.25% 🏦
• Originally a primary residence, converted to a rental 2 years ago 🏠➡️🏢

Now, you might be thinking, "4.25% fixed rate? Hold onto that forever!" But should they really? 🤔

In the video, we break down:

1. 1. Why the 2% cap rate is a red flag, even with a low interest rate 🚩
2. 2. How we could potentially boost the return on equity from 7.5% to 14% 📊
3. 3. The cash-out refi trap: We model a scenario at today's 7.5% rates 🧮
4. 4. Selling strategies: How to use Section 121 to exclude up to $500K in capital gains 💸
5. 5. The potential to turn a break-even property into a $46K/year cash flow machine 💵

Plus, I introduce our "Return on Equity Traffic Light" system to quickly evaluate any property in your portfolio. 🚦

🎥 Click here to watch the full video

After watching, I'd love to hear your thoughts. If this were your property, what would you do? Hold, refi, or sell and reinvest? 🤷‍♂️

Let's learn from each other and tackle these real-world investment challenges together! 🤝