Author Topic: Condo case study refinance?  (Read 260 times)

4tify

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Condo case study refinance?
« on: June 13, 2020, 09:04:24 AM »
I'm a noob so forgive me for lacking info. I'm trying to figure out if a refinance is worth it, and also if in doing so renting my condo in the future would be worth it. Here's the info (and please let me know if you need more):

Market Value: 675k
Purchase price: 590k
Original Mortgage: 472k
Original Interest: 3.375%
Original Term: 30 fixed (26 yr remaining)
Remaining Mortgage: 419k
HOA: $405
Current monthly payment (P/E/I): $2366

Taxes are low due to it being a historic property and qualifies for almost 50% discount.

The property should currently rent for appx $2800, which basically breaks even under the current amount. However I just looked up refinance rates and these are my options:

Rate/APR
2.750% / 2.919%
Points
+ $8,572
Per month
$1,714


Rate/APR
2.875% / 2.996%
Points
+ $5,961
Per month
$1,742


Rate/APR
3.000% / 3.083%
Points
+ $3,904
Per month
$1,770

I ran these through a refi calculator and got the break even points. Option #1 will break even in 5 years, which would cash flow appx $680/mo if I rent. So if my math is right that's $8160/yr making the ROI ($8160 divided by 118k initial investment + $8572 points) 6.45%. Options #2 & #3 break even after 4 years.

Do I have this right? And if so is 6.45% a decent cash flow? (This is LA btw). Thanks!

waltworks

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Re: Condo case study refinance?
« Reply #1 on: June 13, 2020, 12:07:38 PM »
You have not included any money for management, maintenance, vacancy, or SHTF and tenant sues you expenses.

Your place is a terrible rental.

You already have a very low rate, I wouldn't bother with a refi unless you can get ~.5% lower for negligible cost.

-W

4tify

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Re: Condo case study refinance?
« Reply #2 on: June 14, 2020, 08:59:40 AM »
You have not included any money for management, maintenance, vacancy, or SHTF and tenant sues you expenses.

Your place is a terrible rental.

You already have a very low rate, I wouldn't bother with a refi unless you can get ~.5% lower for negligible cost.

-W

Ha! Thank you for your bluntness about the rental. It's difficult because I have so many people around me telling me it's a "no brainer" to just keep it and rent it whenever I decide to leave, but I haven't been able to see the math work. I thought maybe the refi would make better sense.

Ok, thanks @waltworks