Real Estate Investor · Annapolis, MD · Member since 2016 · 65 posts · 12 votes
Hey BP. Back for another analysis question! We own a townhouse that we lived in for a year. We were robbed by our neighbors, which sucks because it was/is a nicer neighborhood, but they are all drugged up and decided to hit us while we were at work. Anyways, the wife didn't wanna live there after that, so we picked up and moved which left us upside down on the mortgage. So we decided to rent it out which turned into our first rental property! However, there is a negative cash flow by far on the property at the moment. But 5, almost 6 years later there is now some equity involved. I just ran the numbers if we were to refinance and continue to manage the property ourselves ( https://www.biggerpockets.com/buy_and_hold_results... ). This would not be a typical cash flow we are searching for ($200+) from a single unit, but it would indeed be cash flowing. Would it make sense to do the refinance and keep the property as part of our portfolio since we already know the ins and outs of the place? The property is in great condition as we have a great tenant in there at the moment. We are also thinking of raising the rent at the end of this lease in August by $25, which would add to the cash flow.
My initial reaction would be to sell (tax-deferred if possible).
But since you are looking at the refinance, I wonder if it would make sense to shop the refinance fees and closing costs to different banks and credit unions. I think you could drastically reduce the cost of the refinance by going to the right lender who isn't gouging on fees.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@Tim Vecchioni, yes, I know, YOUR cash-on-cash return after 10-15 years will be much greater than 5.5%/y, because of your small percentage of cash injection in the first place. But still...
The real main point I want to ram home is: in future, please try to ensure that ANY property you buy, whether it's for your primary or for investment, will NOT leave you underwater if you suddenly want/need to sell! ie. ALWAYS buy under-market and/or seek unrealized potential to value add!
Generally speaking, condos and townhouses will NOT meet either of those criteria. My 2c.
Real Estate Investor · Annapolis, MD · Member since 2016 · 65 posts · 12 votes
9y
Hey Brent,
I think you have done a good job at ramming home your opinions on this matter and I have to say, I agree with you. I was on the fence 50/50, but now I would say I am more 90/10 in your favor. Plus I happened to go look at a place today where I could use that money to make a lot more than what could be projected 10-15 years down the road on this one!