Basic question about cashflow and refinance.

[Dario Miles]

Hi there,

I'm brand new to realestate, haven't made any purchases aside from my current main condo my family and I bought a long time ago.

I currently live on my own in the condo.  The mortgage has $96k left on it, it's worth around $680k.  My monthly cost (mortgage, interest, prop. taxes, condo maintenance) is $2700.

I could rent the place out for between $2800-$3000.  To me that's not a big enough margin.

However, I could cash out refinance, take out $100k equity in cash, and end up with a new 30 year loan for $195k at ~3%, with a payment of around $800 a month.

That would lower my ownership costs down to around $1,900, which would give me a healthy cash flow even if I rented at the lower price of $2800.

I would then use the $100k as a downpayment for my own residence.

This seems like an obvious step to me.  Is there anything that I am not considering here?

[Tim Herman]

@Dario Miles Like @Joe Villeneuve says,better to sell and buy several rentals. Would you buy this condo for 680k for a lousy 3k per month gross. Your new scenario is the same as putting 485k and taking a 195k loan for 1k gross per month. You haven't accounted for any soft costs. vacancy, repairs, and capex. Assuming you net the 12k per year your return on equity is 12k/485k= 2.47% return.