All Forum Posts by: Daniel K.

Thanks for this insight. The existing loan is a 30 yr amortization. I'd thought about a second lien option as well to tap some equity, but I don't think I'd find anything close to the terms of this one with 90% LTV, most seconds on investment 3-unit properties seem to max out around 70-75% CLTV.

 The refinance was offered as a 30 yr FRM

It's sounding like the consensus is that if I can find a return higher than 5%, it makes sense to refi, potentially not all the way up to 90% LTV

 Yes, when I spoke with them on the phone I was clear that I no longer live in the property, and they were alright with it. 

During the pandemic, I bought a 3-unit house hack on the north side of Chicago for $580k with a 10% down portfolio loan through a local credit union. I renovated it, moved out, and it's since been a great investment, now cash flowing significantly with a 3.625% 30 yr FRM. Earlier this week, I got an email from the credit union holding the loan with an unexpected offer. They are willing to allow me to cash out refinance the property with a 30 yr FRM at 5% at up to 90% LTV. A recent comp sold that leads me to believe a reasonable valuation for the property of $800k. My loan balance is about $485k. These terms sound almost too good to be true, the catch being that I need to replace my rate with one nearly 140 bps higher (which is still significantly below market).

Were I to refinance at 90% LTV, my cash flow would evaporate entirely, and I might be slightly cash flow negative until next year when I can raise my below-market tenants’ rents to market, at which point I’ll be modestly cash flow positive again. But at the same time, I will have $235k tax-free in my bank account to put towards another deal which I intend to be cash flow positive. That same amount of money would probably take 10 years to earn via cash flow, and even then I’d have to pay tax on it.

What are the risks of taking this offer and leveraging up again? 140 bps interest rate increase doesn't seem all that bad. I know home values have been softening across the country, thankfully Chicago still seems to be going strong (at least for right now). Should interest rates drop below 5% for conventional mortgages, I know I can't refinance down if my LTV is too low, but other than that? Thanks.

Is this a 2 bedroom apartment that is currently being leased (in the eyes of the CHA) as a 1 bedroom apartment? If so, you will need to apply for a change of number of bedrooms on the standard CHA rent increase form. They will schedule an inspection to verify that the second bedroom does in fact exist in the apartment.

@Scott Byer I'm a little confused on your numbers here--the expenses including P&I you list total to $1525/mo. If it rents for $1600/mo, how're you cash flowing $200/month?