Rental Property Dilemma

[Enrique Garcia]

Hi, back in 2005 I bought my very first investment property, a 2 bed 2 bath 1000 sq ft condo that I completely renovated. Back then, I was a sophomore in college and this property served as my primary home. In 2007 once I finished college, I decide to cash out on the equity I was able to build and put the property up for sale.

After a few months on the market, the property didn't sale, so I then decided to go with plan B. Plan B was to keep the condo as a rental property. The property turned out to be very easy to rent due to its proximity to many desirable areas in town.

From 2008-2014 the property depreciated considerably. I was able to navigate the recession by keeping a low vacancy at all times. At that time, the property barely broke even. Today, I have been able to increase the rent some, but the property still barely breaks even.

My current mortgage is a conventional loan that has 14 years left at a %5.75 rate. The property value has gone back up slightly higher to what I paid before the recession, and my equity in the property is half of current market value. I continue to look for ways to improve cash flow, so I have been considering the following: Refinancing, using private money I have access to at a low rate to pay off the loan, or selling the property.

After getting a couple of quotes, closing cost for refinancing will be around $8000. The new rate will be around 2 percentage points lower from what I have now.

If I decide to pay the loan off with the private money, I will not be incurring closing cost and will be lowering the interest rate about the same % maybe .05% more. Going will the latter will improve my cash flow by about $150/month.

My dilemma is as follow. Opportunity cost! Is this a good use of private money? Right now, I’m looking to acquire more properties, but having a rental that barely breaks even continues to be a concern. I know this is lots to read, but any advice or feedback will be highly appreciated. 

Thanks in advance!

Regards,