Author Topic: Refinance questions for my investment condo?  (Read 991 times)

BlueHouse

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Refinance questions for my investment condo?
« on: May 29, 2019, 10:53:42 AM »
I have the WORST investment condo ever.  I lose money on it every month.  Anybody with any financial sense has advised me to sell this for the past 5 years, but I didn't and I am committed to keeping it for at least 2 more years.  Unfortunately, I never refinanced from an adjustable 7/1 ARM because I kept thinking I'd sell.  Now the rate has adjusted to just over 5%. 

If I refinance an investment property, isn't my aim just to get the monthly payments as low as possible so that rent covers the expenses?   Do I care about ever paying this off if it's just a rental?  I'm asking because I'm getting rate quotes for both 15 and 30 year loans, and it just dawned on me that there may not be any advantage to paying this off in 15 years and it might actually benefit my circumstances to extend the loan back to another 30 year term. 

Some things that may matter:
Currently cash flow negative (about $450 each month)
Income disqualifies me from reporting a loss, but I carry the loss and it is changing my basis (I think)

Papa bear

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Re: Refinance questions for my investment condo?
« Reply #1 on: May 29, 2019, 11:22:03 AM »
Why are you still keeping this?

Rental mortgages have higher rates than if its your primary residence.  I’m not sure you’re going to get anything below 4.5% on a 30yr. 

For me, I’m of the opinion that cash flow is king for rentals.  I’d gladly roll over additional expenses into the loan if I can avoid paying something up front.  That’s not always the 100% most financially prudent thing to do though.


At a 450/month deficit on rent over PITI, you’re really losing a LOT more than that.  I would offload this thing FAST and cut your losses.


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BlueHouse

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Re: Refinance questions for my investment condo?
« Reply #2 on: May 29, 2019, 12:12:57 PM »
Thanks Papa Bear,
I think in my situation, I need to focus on cash flow and forget everything else.  Unfortunately, selling is not an option at this time as I've committed to keeping it for two more years. 

FYI, the 450/month isn't over PITI. it includes a hefty Condo fee.  I can cover the PITI with the rent (just barely). 

waltworks

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Re: Refinance questions for my investment condo?
« Reply #3 on: May 29, 2019, 12:33:10 PM »
Why have you "committed to keeping it for 2 more years"?

Does a family member live there or something? I can't imagine why you would not sell the place. Even if I had just signed a lease with a tenant, I'd pay them to vacate and sell ASAP.

-W

BlueHouse

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Re: Refinance questions for my investment condo?
« Reply #4 on: May 29, 2019, 12:38:11 PM »
Why have you "committed to keeping it for 2 more years"?

Does a family member live there or something? I can't imagine why you would not sell the place. Even if I had just signed a lease with a tenant, I'd pay them to vacate and sell ASAP.

-W

Because I am a moron who loves suffering.  Can we move on now?  ;)

waltworks

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Re: Refinance questions for my investment condo?
« Reply #5 on: May 29, 2019, 01:39:41 PM »
Dude, nobody can help you if you don't want help. Refinancing is not your answer here, and it won't even help much/at all.

-W

M5

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Re: Refinance questions for my investment condo?
« Reply #6 on: May 29, 2019, 01:51:21 PM »
Currently cash flow negative (about $450 each month)

Yeah, you should be lighting your hair on fire with that number.

MoseyingAlong

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Re: Refinance questions for my investment condo?
« Reply #7 on: May 29, 2019, 02:38:48 PM »
BlueHouse,

I feel your pain on having a poor rental property. I was so, so relieved when I sold mine last year.

I think you're right about just minimizing the cash flow required to keep it going.
You could look at amortization tables for 15 and 30 year mortgages and see what the principal pay down difference would be after a couple years. I doubt it would be that much. I'd suggest doing the 30-year refi and, if you want to pay more, set it aside in a higher interest savings account, not on the mortgage.

Best wishes.

BlueHouse

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Re: Refinance questions for my investment condo?
« Reply #8 on: May 29, 2019, 02:45:49 PM »
Dude, nobody can help you if you don't want help. Refinancing is not your answer here, and it won't even help much/at all.

-W

Waltworks, I usually have the utmost respect for your suggestions, so if you have one that will help, I'd love to hear it.  But I've already said that I cannot sell it for two years, so there's not much point in making me feel like an ass about it.


Asking why I'm in the situation or making fun of it really isn't helpful because there's nothing I can do about it at the moment.  In two years, I'll be in a different situation and then I'll be happy to offload it. 

Papa bear

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Re: Refinance questions for my investment condo?
« Reply #9 on: May 29, 2019, 03:05:10 PM »
Ok. So we’re moving on to cash loss mitigation.  Can you find a 30 yr interest only loan?  Or a 3/1 ARM with a really low rate?

Your hope is that maybe you can appreciate some here, but losing 5-6k /year is rough. 



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BlueHouse

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Re: Refinance questions for my investment condo?
« Reply #10 on: June 05, 2019, 09:41:13 AM »
Ok. So we’re moving on to cash loss mitigation.  Can you find a 30 yr interest only loan?  Or a 3/1 ARM with a really low rate?

Your hope is that maybe you can appreciate some here, but losing 5-6k /year is rough. 

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I don't think I fully understand the interest-only concept.  Does the loan ever get paid off? 

waltworks

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Re: Refinance questions for my investment condo?
« Reply #11 on: June 05, 2019, 11:12:23 AM »
You never pay down the principal (until you sell the place). Not sure how easy it is to find interest-only loans anymore, but they do exist. Used to be a thing back in 2004-2007 or so for people to maximize how much house they could "afford".

That would save you a little from month to month, with the downside being that you wouldn't be accumulating any extra equity by paying down principal.

-W

Papa bear

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Re: Refinance questions for my investment condo?
« Reply #12 on: June 05, 2019, 03:44:51 PM »
Ok. So we’re moving on to cash loss mitigation.  Can you find a 30 yr interest only loan?  Or a 3/1 ARM with a really low rate?

Your hope is that maybe you can appreciate some here, but losing 5-6k /year is rough. 

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I don't think I fully understand the interest-only concept.  Does the loan ever get paid off?

No, you would never pay off the loan. But you said upthread you only need to keep this place a few more years.  So who cares if you pay off $800 in principle in that timeframe.  Cash flow is your issue right now.  Keep your payment low.

Unless there’s something you aren’t telling us, like you never plan on selling. And then we’re all going to go round and round about you selling it because you’re losing a ton of money and you saying you can’t sell it because, things. 




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waltworks

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Re: Refinance questions for my investment condo?
« Reply #13 on: June 05, 2019, 06:25:54 PM »
If you're selling it in 2 years, it's probably not worth doing anything. Cost to refi will more than kill any savings.

If you're not planning to sell, ever, for whatever secret reason - then I guess do an interest only loan or wait for rates to drop more maybe? Either that or pay the place off.

-W

redbirdfan

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Re: Refinance questions for my investment condo?
« Reply #14 on: July 03, 2019, 12:10:55 PM »
Did you sign a two year lease?  I'm not asking to push back about the two year holding time, I'm trying to determine if there is room to increase rents/anything that can be done on tenant side to help with cash flow.  What is the FMV of the condo vs. what you paid?  Is it appreciating even if it's cash flow negative?  Is there a way to force appreciation so that you can get more after the eventual sale?  Is the same thing that prevented you from selling so far still going to be an issue in 2 years?  How much additional cash flow would you get if you refinanced?  What are the costs associated with refinancing?  Can you do a streamline refi?  Was it purchased as an investment or with O-O financing?  Are you looking at investment rates for the refi?  How do the rates compare?

It's kind of hard to help based on the given the parameters and limited info. 

Dicey

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Re: Refinance questions for my investment condo?
« Reply #15 on: July 04, 2019, 12:52:37 AM »
Ok. So we’re moving on to cash loss mitigation.  Can you find a 30 yr interest only loan?  Or a 3/1 ARM with a really low rate?
Your hope is that maybe you can appreciate some here, but losing 5-6k /year is rough. 
I had a property that was cash-flow negative. I loved my tenant. He had cancer and we both knew he was going to die. I promised him he could live there as long as he wanted. He lived a lot longer than expected, and died at home per his wishes. The house is cash flow positive now and I'm glad I kept it. I still miss him. RIP, Jack.

I like Papa bear's thinking, as quoted above. I would look at any way to minimize the cash outflow for the nect two years  that doesn't cost you any high fees. Start by calling your current lender. Ask what options they have. You might be pleasantly  surprised.