It's starting to feel real

[John Ford]

Today, I refi'd my rental property. I did a VA IRRRL streamline refi that I locked in before the election at 3.5% amortized over 30 years. My current tenant is paying quite a bit below market rent because I lowered the rent to get a decent tenant in because I started freaking out a bit while it was vacant. Even with the house vacant my DTI ratio is about 26% so it wasn't money...it was just purely emotional anxiety..."Ack! I have to find a tenant!!!"

But even at below market rent, the house was cash-flowing about $200/mo. (Not counting some capex expenditures to make the house more tenant-friendly...like adding a back door that doesn't require going through the standup crawlspace. As OO, that wasn't a problem but prospective tenants balked at the idea!) Today's refi brings the cashflow up to nearly $700/mo. And I'll be raising the rent next year. If this tenant stays, I probably won't bump them up to full market rates. But they work in a fairly transitive industry and are in town working on a 1-year contract so if their contract isn't renewed, maybe they'll move and I can get a new tenant in at full market rents bringing the cashflow up to nearly $1000/mo. (I know, if I'm hoping they'll move so I can raise the rent more, I should just raise the rent anyway and if they stay...*bonus*, if not, nothing lost. But I dunno...I'm not "there" yet.) And I still have $150k equity in the house.

I bought the house in 2005 as my personal home. I bought it on a VA loan, zero-down. I had a loosely defined plan of living there until area rents rose enough to support the mortgage then renting it out. The physical location was perfect for me even though the neighborhood itself was transitional. But as a Marine Corp vet and competitive shooter, that didn't bother me one bit. It was a pocket of blight and low-income housing surrounded by great neighborhoods and major development investment so I knew it was just a matter of time. And in the meantime, I got to live within amazing proximity to everything I loved doing. (Seriously. Now that I've moved, the thing I miss most is the l physical location. It's freaking perfect.)

I had originally planned to do a cash-out refi to get started on another investment property but now I have some other things in the works that may net me $50k-75k cash in the next 6 months or so. So I went with the streamline refi and left the equity to maximize cashflow. If this other thing falls through and I need to use the equity, it'll still be there (knock on wood). But even if the market tanks tomorrow and the equity evaporates...$700mo cashflow!

All in all, I'm pretty stoked and proud of myself. Even though this was part of a hazily defined "plan", I still can't believe it's actually freaking working. I keep looking for the "gotcha!" but I haven't found it yet.