Financing Advice for Rental Properties

[Zachary H.]

Hey guys, 

I'm fairly new to this website. My wife and I have 3 rental properties in Conway, AR and are going through the process of buying our 4th. I am seeking advice because I just don't know the right answer and want to make sure we are doing everything right that we should. 

Disclaimers: 

The values that I am going to mention are for when we purchased the properties not the current FMV.

And these were all turn-key rentals, no rehab.                                                                              

We have the 3rd in an LLC (just got it) and are working on getting the 1st and 2nd in the LLC and will buy the 4th through the LLC.

Our first SFH we bought in 2012 for $85k with an 5 year fixed (balloon) in-house loan since we did not have much/any credit because we were still in college. We have it paid down to only owing $29k on it.

The second SFH we bought in 2015 for $80k and we have it paid down to only owing $59k. We did this one as an in-house loan as well.

The third SFH we bought in December of 2016 for $93k, we pledged the first house's equity to do this with no money down. We don't have much equity in this one. Also an in-house loan.

The fourth SFH we are buying and have started the financing process with the same banker doing an in-house loan on it. We are getting it for $90k with $10k down-payment.

I know these numbers aren't as good as a lot of you guys have. I've seen on here that a lot of people find better deals than we can! 

We've realized we may have made a mistake when we pledged the 1st house's equity to buy the 3rd. 

We just want to ask what you would do in our situation? 

In your opinion, would it be better to refinance these in-house loans and do 30-yr mortgages? (I understand that if they are in the LLC this isn't possible.)

Or would you just keep them as an in-house loan and risk having to refinance when interest rates may be much higher? 

I really appreciate any advice. I know we don't have a perfect investing strategy. We are still young and dumb :) Just trying to learn from our mistakes and also get advice from people who have been in the business for much longer.

Thank you!

Zac

[David O]

I would 100% ditch the LLC and refi into 30 year rates. It's a shame you didn't when you could get locked in for 30 years at 4%. You willl be looking at closer to 5% now, but rates are still good historically. I'm a big believer in using debt to my advantage. 30 year loan at 4-5%? I'm in no hurry to pay this off.

What kind of numbers are you looking at on eaxg house cash flow wise (rent payment - debt payments) with your current arrangement?