Should I sell, cash-out refinance & rent or just leave as is?
Hello All!
Fair new here but would appreciate any insight or advice!
I was previously in the Army and bought a brand new single family home in El Paso, TX using my VA loan in 2012 for $146k. I moved back to PA because this is where I'm from so I left it rent it out (landlording from afar). I put solar panels on the home so now its should valued at about $200k.
Here's what the numbers look like currently:
Mortgage balance: $94,948
15 year fixed mortgage at 2.5% (6 years in, 9 left to go)
Interest: $197.75 monthly
Principal: $776.58 monthly
Escrow: $536.95 monthly
Total Monthly: $1,511.28 (tenants are paying only $1,000 but I told them $1,600 or get out so they're leaving on Oct. 1)
Taxes: $5,268.10 yearly
Insurance: $1,002.15 yearly
If Renting:
Property management company says I can get a tenant for $1,500 to $1,600 a month (one suggested starting at $1,700 due to little-to-no electricity bill).
They take one months fee to set-up place a tenant in, 10% every month to collect rent, and $40 fee per maintenance coordination.
Refinancing offers:
I have 3 offers so far and working on more, all are 30 year fixed/conventional. Since this a cash-out refinance on an investment property and I'm also not in the state of Texas many lenders won't even touch this and the closing cost are high with higher interest rates. The cash back is pending on what my house appraises at, which could be $190K to $210K.
Summary:
| All 30 year fixed | Offer 1: | Offer 2: | Offer 3: |
|---|---|---|---|
| Interest Rate | 4.25 | 4.375 | 4.875 |
| Total Closing Cost | $103,734 | $108,913.33 | $106,790 |
| Base Loan Amount | $150,000 | $150,000 | $157,500 |
| Cash To Borrower | $46,266 | $41,870 | $50,710 |
| New Monthly Payment | $1,275 | $1,285 | $1,327 |
| LTV | 75% | 75% | 75% |
| Estimated Home Value | $200,000 | $200,000 | $210,000 |
Offer 1:
Rate: 4.250%
Loan Cost/Closing Fees: $8,816.24
- Loan Cost: $8,775
- Initial Escrow Payment at Closing (Taxes & Prepaids): $3,273.15
Loan Amount: $150,000
Discount Point: $2,917.50
Cash-back: $46,265.76 (home estimated at 200k)
New Monthly: $1,274.58.16 ($833.50 for Principal and $494 for taxes & insurance)
Offer 2:
Rate: 4.375%
Loan Cost/Closing Fees: $13,995.33
Loan Amount: $150,000
Discount Point: $2,062.50
Cash-back: $41,879.02 (home estimated at 200k)
New Monthly: $1,285.88 ($748.93 for Principal and $536.95 for taxes & insurance)
Offer 3:
Rate: 4.875%
Loan Cost/Closing Fees: $11,872.00
- Loan Cost: $9,000.88
- Initial Escrow Payment at Closing (Taxes & Prepaids): $3,248
Loan Amount: $157,500
Origination fee/2.125% of Loan Amount (Points): $3,346.88
Cash-back: $50,709.90 (home estimated at 210k)
New Monthly: $1,327.16 ($833.50 for Principal and $494 for taxes & insurance)
Other:
I'm leaning towards option 1 because of the better rate, lower closing cost and lower monthly. Lender 2 doesn't want to give me what the numbers look like with a $200K estimated value so its hard compare apples to apples.
Why:
- 1. I want to re-establish my VA entitlement (allows me to put ZERO money down on a property).
- 2. I want some cash flow, my monthly right now if bleeding me out.
- 3. I can use this cash to use on another investment property either as down payment (my not be necessary because of the VA loan) or used to refurbish.
- 4. Overall, I'm trying to get into BRRRR real estate investing. I'm currently looking at a 4-unit multifamily so I can live in one and rent out the rest. I need to live in one in order to get the ZERO money down deal.
- 5. Maybe selling is the best route to go but I think waiting until Spring would be best to get the highest selling price. I also didn't want to pay capital gains taxes on it.
Let me you what you all think! Thank you in advance!!
