All Forum Posts by: Davin S.

Background: My wife and I own a 4 unit property. We live in one of the units and rent out the other 3. We purchased the property just a little over 8 years ago at $189k with 25% down at a 3.75% mortgage rate for 30 years. At the time, it was assessed by the city at $200k, and rents were very low ($2,830/mo for all 4) because most of the units were dated. The property was reassessed by the city at $250k last year, and recently by the bank at $315k (market value). With all the units rehabbed, the combined rent for 3 apartments is $3,100/mo. Plus there's the apartment we live in rent-free, which would earn an estimated $1,400-$1,600/mo were we to rent it out.

The Question: With rates as low as they are, we would like to refinance the property for the first time. Should we:
1. Refinance the remaining balance (~$114k) at 2.625% over 20 years? (By my calculations, saving us ~$9k) OR...
2. Refinance with cash out ($250k loan, 3.25%, 30 years) - so that we have the cash available to put down on a second property should we want it? This would cost us roughly $150 more a month, but this expense and the new mortgage would ideally be covered by the second property.

The local market is HOT, so we might be hard-pressed to find a property that is profitable in the next couple of months. Do we go with #1 and then HELOC when the market cools down / if we find a property that works for us? Or go with #2 to have the cash ready, but risk not putting it toward a property for some time yet? I'm thinking #1 is the way to go (higher interest rate, but borrowing less and only when/if we need it) but figured it couldn't hurt to ask.

Thanks Andy. Is there a specific calculator that you would recommend for doing so?

I am a relatively new landlord / multi-family investor. I bought one of the worst houses in a good area of town. In this B-level property I have 4 units, one of which I completely renovated when I first bought the property, and was able to raise the rent by $200/mo as a result.

My question pertains to the other 3 units. All of them have rather old, outdated kitchens - chipped, broken linoleum tile, 70's style cabinets with minimal storage space, and older appliances. My thinking is to update the kitchens with tile, nicer cabinets (stock so they don't break the bank), and add dishwashers (popular in our market) - but keep the other appliances until they stop functioning. There are also more minor updates that need to be done like painting (easy) and hardwood refinishing in two of the apartments. Conservatively, I project that I could raise the rent by at least $100 per unit when all is said and done, and of course, nice-looking units will attract reliable, long-term tenants.

On the other hand, am I going over the top? Should I be spending all this money on buying a second property to maximize my cash flow? I am not sure if I feel comfortable managing a second property at this time, especially when the other is unfinished, but I do see the benefits of having a more positive cash flow.

Thanks in advance for the advice!