Should I Refi my first rental property

[Wayne Holliman]

My wife and I just bought our first property. It is a HUD home we got for $24,600. It has a lot of work that needs to be done. We are pretty handy and will be able to do most of the rehab ourselves. We are putting in new floors, total paint job inside and out, new kitchen. The comps for this 2/2, 1025 sq ft house are $65,000 - $80,000. The estimated total refurb will be $7500. Like i said, we are doing almost all of the work.

The total cash invested when we go to rent will be $32,100. We will be asking $700/mo for rent based on the rental comps in the area.

QUESTION: Should I refinance this property with a $50,000 30 year mortgage?

Excited to get involved with BP!!!

[Mark Gallagher]

@Wayne Holliman

The answer is.. it depends! 

Are you paying cash for the purchase and rehab? Are you looking to buy more? Once finished, what is the "real" price you could sell it for. Typically in these lower priced areas, you can make it comp out at say $70-$80 but someone might only be willing to pay $50. You don't want to overleverage. If you want to buy more, it would likely be best to just refi out your costs.