BRRRR - Refinance now or wait until rents raised to market rate??

[Andrew Lackey]

It's a beautiful fall morning! The birds are singing, the sun is shining, the BRRRR of winter is not fully here yet ;) Or maybe it is?!?!

haaaaa....ok enough funny business down to business of this post. 

Ok, I have a property I just purchased a few months ago that I want some feedback on whether or not to refinance now or later.

Situation:

Property purchased 130k cash

$10,227 in repairs

"All in" cost so far $143,451 total including everything

Rents for $975 through 6/30/2020 

Cashflowing right now $730 if i include monthly property mgmt, insurance, and taxes

ARV after repair approx $180k

Rent will be raised to $1200-1300/month 7/1/2020

Once refinanced, will cashflow $220-250 depending on rates.

Cash on cash return between 27-63% depending on how things shake out on ARV(probably sounds crazy but this accounts for all in cost 143,451+closing cost to refi estimating 8,000-rental cashflow now until June 2020 5,840-refi cash out payment 138,000)

Questions I want to get some opinions on:

1. Should I let is cashflow at $730, with no mortgage until 6/30/2020 and just wait to refinance once rent is raised to appropriate market rates, or should I refinance now, and make literally no cashflow until 7/1?

2. If i refinance now, I would have my cash back and more, but is it really worth it?

3. I'd like to have the cash back to be able to redeploy the $, but is that smart?

4. Would you try to break the lease and give cash for keys?

5. How much cash would you offer?

6. Would it be smart or ethical to ask them to vacate for a payment this time of year?(my management company says keep tenant in place until lease is up)

7. Should I get appraisal done before lease is up so i can refi very quickly once new lease is in place?

8. Any other suggestions to make this deal better?

Curious to see what reactions and opinions i get!

Thanks BP. I hope to hear from you soon!

[Todd Rasmussen]

@Andrew Lackey

Refinance now. If you are moving the refi proceeds into your next project there is the opportunity cost to waiting 8 months to put your money to work again. I wouldn't mess around with cash for keys. Once you figure the additional projected rents less the month for turnover less cash payment to tenant, I think you'd decide it's not worth it either.