Help analyzing re-fi deal.

[Dave Jenkins]

Hi fellow investors. I'll try to keep my post short and sweet. My wife and I own 2 properties separately: 1.) 4-plex she bought 13 years ago that is very positive cash flowing. And 2.) A large single family home I bought a couple of years ago that we live in. (We've been married 15/mo). We have a good amount of equity between both properties and want to now combine our resources to purchase more long-term income properties.

Our plan is to first get her 4-plex refinanced and pull cash out of the building (she's at 6%), then use that (and some cash of my own) to shop for a new building.

A bank made us an offer today and I am unfortunately not knowledgeable enough to really wrap my head around it. I feel like I should continue to shop around, but I'm curious what BP thinks.

We're mostly concerned about the "rate" - A non-fixed loan doesn't seem smart. We're not afraid of calculated risk... but not exactly sure if this is that, or just a bad offer.

Also, not sure if the "use of proceeds" line is just a technicality... as the banker and I clearly spoke about us using the money to acquire more property, not maintenance.

Anyway... look forward to hearing your thoughts!

Loan Amount: Up to 65% of appraised value on subject property (estimated $425,000)

Term: 25 Years, fully amortizing

Use of Proceeds: Refinance current 1st TD note on subject property and provide cash out to the borrowers. Cash out will be used in part for maintenance of theproperty, and potentially to be utilized to purchase a second income property.

Rate: 5.00% Fixed for 5 Years; Thereafter rate will adjust each 5 years, and will be based on the 3 Month Libor Swap Rate’s 5 Year Maturity figure plus a margin of 3.25%. As of 8/20/13, the applicable index rate is 1.75%

The Rate described above will be honored as noted at 5.00% cQntingent upon funding prior to September 20, 2013. Rate will remit to the index plus applicable margin if transaction is not closed by this date.