Refinance or use saved cash

[Matthew Maddaleni]

First time posting a question.

To all the pros.. the knowledge you’ve shared throughout these forums is invaluable for new RE investors like myself. Thank you so much.

My wife, infant son and I currently occupy a 1924sq.ft. duplex located in Bradford/Haverhill MA. 01835. The property literally straddles both C and B class neighborhoods. We bought it for $340k at the end of 2017 with 11% down.. current mortgage balance is 291,500. Tenant is single, has been here since 2001and has no plans on moving out.. he’s a fantastic tenant and we feel very fortunate.. rent is 1450. Haverhill MA is currently in a transition.. the mayor has begun conducting his master plan and suddenly there are apartment complexes springing up all over.. beautiful apartments too. Supposedly, the base rent for a two bed in Haverhill is 1450 but I’m seeing these new two beds going for 1750+. Our property is located in a very desirable area.. it’s directly across from the commuter rail and the Merrimack River.. we’re also less than a 10 min walk from a bustling, up and coming down town.

Both apartments are basic and have never been upgraded to date other than new windows I had installed last year. We have a flat roof that must be replaced within the next couple years or so.. approx 10k to replace.

The decision I’m struggling with...

We've managed to save 20k (some invested in equities/funds, rest in cash) We'd like to move out soon into a single family or another multi fam with bigger apartments. Should I spend all of our saved money and replace/upgrade as much as possible in order to attract tenants willing to pay at least 1700/month? I'm meeting with an appraiser next week, but my guess is the property is worth 360-380k so with bank offering only 80% LTV it doesn't leave much.. should I refinance and take what I can get? Is it worth it? Or should we just sit tight and wait for the property to hopefully appreciate more? Our original plan was to stay 3-5 years, moved out, then have a kid. Well we were pleasantly surprised and now we have a 7 month old lol.. so it would be nice to get into something bigger. What would some of you do in my position? I definitely want to hold on to this property as it's value will improve over time imo, plus I want the cash flow. We both work full time, have good credit and my debt to income is very low. Any suggestions are appreciated.. let me know if there's any additional info needed.

Thanks.

[John Teachout]

Depending on how much closing costs would be to harvest the equity and whether you would have other funding sources to cover capex/vacancy if you use your savings, I'd lean towards using your own funds for now. I presume you can still fit in the unit with the 3 of you.

Regarding rents, I'd say you're probably getting market rent for the property based on your description. Just because other similar sized units are renting for a certain amount do not make your unit worth that amount. (could be more or less). I think if you raise the rent much, you might encourage the existing tenant to move which isn't in your best interest.