All Forum Posts by: Ken D.

@Steve Vaughan I haven't gone through the refinance process yet but assumed it was very similar to getting a loan when you purchase a house. In any case you reason for not liking to refi makes sense. Everyone have there targets and goals. 

Looks like 20x will likely become one of my rule of thumbs!

Thanks @Karen O.. I'll take a look at what they have to offer!

Hi @Rich Weese. Are you using the mobile phone app or regular web browser? If using the web version you can click the bell in the top right corner to get to your inbox. From there click the message and in the bottom right there should be a field to type. Click send reply and your message should be off.

If for what ever reason the issue is something else you can try biggerpockets support. The forum won't let me include the email address so I'll PM you.

@Dave Foster Seems to be the response I'm getting and is the way I'm leaning. Currently getting my duck in a row to sell, but want to make sure I'm not missing some other key piece that could help with a better outcome.

@Karen O. You mentioned taking out a $200K HELOC. I don't think I'm able to open a line that big on this property. I've called about 20 banks/credit unions in my area (San Jose) and the only bank willing to even allow a HELOC on an investment property was Wells Fargo with a cap at 60% LTV if I remember correctly. With the existing principle balance on the first mortgage that only affords me about $80K. I can probably do well with this amount of cash as well, but it limits the type of properties and markets I can purchase unless I start getting more creative with financing.

Are you aware of any lenders that might allow closer to 80% LTV HELOCs on investment property? If so, this would open up a third option that is better than cash out refi since I'll be able to keep my low interest rate on the first mortgage.

@Jeshua Patrick @Karen O. @Amy Beth Thanks for your feedback. I just added more detail in my last post. Either decision will allow me to free up cash for further reinvestment in RE (will be out of state). I also have a W2 job that can help with weathering storms if needed.

@Rich Weese You are correct. In June I will no longer have lived in the property 2 of 5 years and will loose the tax exemption if I don't sell. It currently cash flows well. About $600/mo after taxes, mortgage, insurance, and property management, but I need cash to invest further, hence the question to sell or cash out refi.

With current rates and using box homeloans instant quote, I estimate that I can maintain 75%LTV, take out about ~$200K, and basically come out even after rental income.

Not an easy decision right? Sell with tax exemption for ~$320K in my pocket (not total profit with what's been paid down) or refi/leverage with $200K and keep the property in a market where rent is increasing and the property is still appreciating... 

From your profile description I assume you've seen this type of situation many times before. I'm definitely interested in what you'd do, but rather than find an answer here, I'm looking for strategies/criteria seasoned investors like yourself use or have used to continue to grow your portfolio.

I appreciate your feedback (as well as all who have responded).

@John Thedford Very good point on the money earning more than it costs. I don't plan on taking out more than what rent could cover including expenses if I refinanced. I will also have to keep a buffer for rent fluctuations but for now rent and property values are still increasing in the area.

As far as cash reserves I also have a good paying W2 job and could keep afloat if times turned. The why is to use the equity that I've gained to expand my portfolio to increase positive cash flow.

@Jay Helms good to know there is another name for the rule and it sounds like it’s something people use. 

Very good point on the second exit point being when the property no longer has tax benfits through depreciation.  That’ll definitely be one I keep for the books if I get to holding property that long. 

Same question I asked Steve, any reason you wouldn’t cash out refi instead of sell?

@Steve Vaughan looks like I hit the unlikely situation of hitting 20x annuals rent. But rents are still going up and I know the property will appreciate further in the area my property is located (San Diego). Property values have also exceeded cost to build pretty much everywhere, and flips have been happening non-stop for the past 5 years. Basically the neighborhood went from a B- neighborhood to A- neighborhood and I don’t expect that to move the other way in the near future. 

But property values only matter when you buy, sell, or refinance. 

If rent could cover your mortgage and expenses is there any reason you wouldn’t just cash out refinance and use that money to purchase more buy and holds?