All Forum Posts by: Heidi Kenefick

I bought a 3/2 SFH as a primary in 2015 for 136,000, the interest rate is 3.375% and it is on a 7/1ARM that is up for adjustment in May 2022. The value has grown to $200,000 so I have about 93K in equity right now.

I want to use some of the equity towards a down payment for a second rental in the same area. I got some quotes yesterday and to do a cash out refinance as an investment property the rate is between 4.6-5%. I want to pull 30k out to put towards the down payment.

Alternatively I could just keep saving or I could take a loan against my retirement savings to get started.

Is it worth it to do the cash out refinance when the interest rate will go up by 1.3-1.7% ? Or should I just leave it until May when I find out what the new interest rate will be (it could go down), keep saving or look into a different strategy?

Thanks!

I’m house hunting later today, and this market is crazy. It seems every house gets 10 offers and sells in a day.

So- I don’t want to overpay because I’ll be selling in 2 yeas (unless life changes).

Should I go for a cheaper house and do a live in flip? Or buy something already upgraded and save the hassle?

I live near Hartford, CT where everything is expensive for no rhyme or reason. It’s not like we have nice views, nice weather or nice taxes! In the best towns with the best schools, nice but not upgraded homes start in the 350 ballpark, and complete dumps list for 200k. In other nice but not the best towns, houses that are nice start in the mid 200’s and renovated in the 300 ballpark. Because of this, there isn’t much wiggle room even after I do renovations if I purchase an older dated house.

Questions- when looking at a live in flip- go for neighborhood? Or cheapest property? Or just stay the hell away and get something already upgraded?

Thanks!

@Theresa Harris

The promotion was because they had 7 vacancies when I moved in, and it was for $345/off market rate, so they have ended that plus a 4%increase which is $104/month increase =. $450/month. 😳

The house is the better option, the down side is that most houses in my area are in the upper 200 to mid 300's for a decent house, and property taxes on houses can run as high as 10k/year (but it's a wash with the HOA fees). I would gain less equity over two due to the increased cost, however, I can afford to purchase in this range using a zero down loan with no PMI. And it's just a crazy market and I'm being a bit lazy when it comes to not wanting to deal with bidding wars.

I would have to pay realtor fees upon the sale of the house/or condo.

My rent on my condo is going up by $450 in two months when my lease renews!! This is in part due to a promotion I was given when I rented it 3 years ago not being renewed. New rent will be $2200/month. They offered to sell it to me for $216000. The HOA cost is about $350/month. I have two loan offers one is for a physician loan, so no PMI but requires 5% down because this is a condo, 2.97% interest rate on a 15 yr fixed. Total cost to close will be close to 20k, monthly expenses with HOA fee will be just over 2200/month. I only have 15k that I can comfortably put towards this, so that's problem one. Problem two, I only plan to be here another 2 years, so when I sell I want to get my money back out.

Similar units in my neighborhood sell for 215-230k right now. If I finished the basement and did some upgrades I could potentially sell for over 240.

Option 2- buy a single family house, no HOA fee, no PMI and 100% loan to value, so less money out of pocket to close (closer to 10k). Same issue of moving in a couple of years, and right now everything sells so fast it is crazy! Hassle to buy and hassle to move...

Which option seems to be the better financial choice? This isn’t a long term play, so I’m not emotionally attached to the condo or a house, just want to do what makes the most sense. Thoughts?

@Nick Dillaha

I love Dave Ramsey! I sold my 2018 Prius and bought a 2014 Prius all cash. It was like Christmas eliminating 20k in debt in one day! I put the $450/month toward my student loan and am paying that off aggressively. Once I’m done, I’ll invest in rentals. Yes, it might take another year or two before I invest more, but I would rather invest from a point of financial strength rather than worrying about all the payments that need to be made. If I have vacancy and need to carry the cost, or large repairs, etc, it will all come from my paycheck, and if all of my paycheck is tied up with other expenses, it creates a lot of risk. I’ve been there when I was between jobs and couldn’t get my house rented. It was stressful, and I don’t want to go back to that type of stress!

Pay off your car and other debts, then start to build significant wealth with real estate. I believe Dave when he says it’s the fastest way to wealth. :)

@Joe Villeneuve

All very valid and true points.

Guess it just depends on your comfort level. :)

@Joe Villeneuve

If that’s how you like to invest go for it! I just think it’s flawed thinking and more risky... I used to think the same way but have changed my mind.

Debt is risk, because you don’t own the property, the lender does. If they call the note due, or your tenant stops paying and you default, the bank forecloses and you lose your equity and the house.

Now, yes it’s slower but your argument of building a larger portfolio quicker is also flawed. You can use 100k to buy one house or buy 5 with 100k down and 400k in loans. The paid for house will let’s say cash flow 1000 a month and the leveraged houses let’s say 200/month. You get the same 1000, but no risk of foreclosure and your net worth is higher in the first scenario. So while you might build a 500 million dollar portfolio with debt, you will owe 480 million to the bank, and your net worth will be negative. If you own the properties outright, you keep all the cash flow, have zero risk, still make about 10-12% on your money. You don’t lose money by buying the house, it’s just not liquid. Plus, you aren’t paying interest. Some argue the tenets are paying the interest, but nonetheless, the mortgage cuts into your cash flow.

I realize my idea is very contrary to what a lot of people preach and do. I just think there is more than one way, and it’s a good idea to understand multiple methodologies.

@Joe Villeneuve

I don’t disagree with you. I think its about risk tolerance. For myself, I would pay off debt and invest from a position of financial strength rather than financial weakness. Having debt means having risk, and certainly you will not make as much money as quickly, but you also won’t lose it if the market turns.

@Dave Rav

Yes I believe so, only because I’ve received mail flyers from them advertising them.

@Jamell Glanville

You could also consider investing in the stock market. 10k isn’t a lot in realestate but is a decent sum to start investing in index funds.