Pay for a REFI or Stay with Hard Money?

[Kalin Stocker]

I haven't posted for a while so I thought I'd start with a little "Win" story on a flip I did and pose a question at the end (not a huge win but everyone likes to hear about a project go well right?). 

Bought a place on the South hill in Spokane, WA. Purchased at $180,000, borrowed at $200,000 (some of it financed closing costs and some of it, rehab funds). After closing put about $13,000 of personal funds into it beyond the rehab funds from the loan. With our holding costs totaled to $5,400 we were all in to the project about $219,000. 

Found a lease option buyer at $249,000 FSBO with no realtors. She put $11,000 down at $1,400 per month and has a two year option contract. Down payment goes towards the balance, lease payments do not. So positive cash in the end minus sale costs will probably be about $25,000.

My question is about whether to Refinance it with a conventional Fannie Mae type loan or to keep it at the private financing I already have? Private financing is at 11% and will be cash flow negative wither her monthly rent until she purchases the property (she says she will purchase it this year, But who knows). Negative cashflow is roughly $484 per month. With a conventional loan it would be cash positive-- Not much, but better than losing money. 

My only real concerns would be pay additional unnecessary closing costs if she was going to purchase quickly. The only other thing is that I am a little worried that the appraisal might come in low because it is a refi. I have no doubts that the appraiser will be able to arrive at the $249,000 dollar amount on a purchase transaction but my refi appraisals always seem to come in a little low. 

Any Thoughts? Do I bit the bullet and pay some negative cash flow for a few months (potentially... could be longer) or do I attempt a Refi? 

[Don Chang]

A couple years ago I got a BECU 12 yr no fee fixed loan on an investment property https://www.becu.org/loans-and-mortgages/home-loans/fixed-rate

I do not know if they still have this program for non owner occupied anymore but worth asking.  This could be an option if you don't want to pay the closing costs on a refi.  When I did my refi I didn't have to pay any closing cost at all even the appraisal was free.  Having the loan amortized at 12 yrs isn't ideal for cash flow but comparing 3.526% to your 11% rate you should be improving your cash flow by a couple hundred dollars a month with no cost to you.