Rental Refinancing Strategies / Baby-steps RE Investing

[Joseph Murphy]

First post.. here it goes.

My wife and I own a townhome that was originally purchased as a private residence.  Of the 14 years that we've owned the property, we've rented it for almost 11 with only 5 or 6 months of vacancy over the entire period.  Monthly, we are net positive cashflow, averaging about $75/mo.  Annually, it's hit or miss, especially if we gap renters or have major repairs. We have ample cash reserves to protect us from the property though.

Our current mortgage on the townhome is a VA loan and we owe approximately $188k at 3.1%, paying approx $1200/mo. We're getting $1500/mo in gross rent, about $1300 net, so less that the desirable 1-2%. But considering this was not purchased as an investment property I'm not bent about this number.

I'm looking to use this as a transition into real estate investment (residential rentals for now) and am looking to refinance. I've looked into paying the mortgage down $30-35k to get into the $150ks and refinancing to reduce our monthly payment. This would definitely improve our rent/mortgage ratio, but would require a significant outlay of cash upfront, as well as closing costs on the refi. I've looked into FHA (which I don't qualify for) and have considered a 1-on-1 negotiation with a bank loan officer to prove cash flow and earning potential to try and negotiate a no-cost refinance. My question is, how would any of you with experience go about this? What strategies have I not considered? Should we just dump the property and start from scratch, even though it's a proven earner and it has a high fill rate? What strategies could I use to reduce my monthly outflow on the property with the lowest out-of-pockets costs?

Thanks for your input, I'm looking forward to learning from you all.