2 Rentals and a house hack. Now what?

[Dillon Alder]

Hey all! I just wanted to give an update and ask about my next move in RE.

I have 2 rental properties in Idaho that cashflow a combined $400-500 each month and a primary residence in Salt Lake. My brother and I bought the Salt Lake home together and we Airbnb 2 of the rooms to cover the PITI each month. We are fixing up the 1100sqft unfinished basement as a live in rehab. Purchase price was $315 and fixing the basement should add 100k to value.

My DTI is shot (~60%) because of the recent purchase and being unable to claim the income from Airbnb for a while (2 years if we don't move out, 1 year if we do)

I’m in the process of refinancing one of the Idaho rentals. I have about $82k equity in this one and would be able to pull out $24k of that for a cash out. The problem is the closing costs: they want about $9k upfront just to give me $24k and I’m only losing a little over a point of the interest rate. (Current 4.625 to a 3.5% refi) I have to use a co-signer for the refinance also just to qualify.

This loan won’t pay for its closing costs until the very end of the loan and therefore doesn’t make much sense from that standpoint.

They told me I can do a rate and term refinance and lower the payment $100/mo and pull out $2000. This loan will still take about 5-6 years to pay for its closing costs. I’m thinking of going this route because I feel like I will have the house for a long time, but I am unsure if it makes sense. I also wanted the $24k for some other investments, but it doesn’t make sense to pay $9 grand to pull out $24 grand. The ROE is very low with my $82k equity and so I want to use that equity elsewhere without selling the property.

Please offer your advice and maybe some solutions to my predicament and how I can continue to further my portfolio.

Thanks,

Dillon