The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: SpicyMcHaggus on January 28, 2015, 09:31:38 AM
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I'm looking into refinancing my duplex that I purchased in 2013. I'm not happy with the FHA rate and want to eliminate the PMI.
Long story short, I tried to do a flip, didn't make out great, and wound up having less than I thought for a down payment on my owner-occ duplex. My finances have recovered, and after getting spending and investing under control, I want to fix my cashflow. I now have ~11% equity, on a zillow estimate of $131k, I owe $117k. By the end or mid 2015, I hope to have enough in savings and extra mortgage payments to reach 20% and qualify for a standard 30 year refi.
Home value: $131,000
Loan: $117,000
Rent total: $1425 (should raise long term tenant's soon)
Current payment: $1120 (includes principal, interest, insurance, prop taxes, and ~$110 PMI)
Water bill: $40/mo
= monthly cashflow: $265
*lets not get into the discussion about the 1% or 2% rule on this house. My city is notoriously hard to reach that rule due to high property taxes and low rents. I have a long term tenant in the bottom who has lived there ~20+ years. Upstairs is myself and my roommate, who has expressed interest in taking over the whole upper unit.
Here's some rates being offered by the local credit union.
I have debated keeping my payment roughly the same and going for 15 year, or lowering payment and increasing cashflow with a 30.
Term Rate APR Points Pmt per $1000
30-Year 3.375% 3.548% 1.50% $4.42
30-Year 3.625% 3.678% 0.00% $4.56
30-Year - No Cost 3.875% 3.925% 0.00% $4.70
20-Year 3.375% 3.447% 0.00% $5.74
20-Year - No Cost 3.625% 3.692% 0.00% $5.86
15-Year 2.875% 2.962% 0.00% $6.85
15-Year - No Cost 3.125% 3.207% 0.00% $6.97
10-Year 2.750% 2.874% 0.00% $9.54
10-Year - No Cost 3.000% 3.117% 0.00% $9.66
Before I start making extra payments, am I better off investing the extra cash or putting it on the house and refinancing?
I could potentially double my cashflow (to $500 / month).
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IMO cashflow is king, nothing helps you sleep better then stability. I would refinance.
you said owner-occupied, so your living in one of them? if thats the case then your occupying a unit worth $1425/month? if thats the case then I would say the property itself is meeting/exceeding the golden 2% rule.
Ultimately the question is what do you want as a cash on cash return. Most RE investors feel your COC return should be somewhere between 10% and 15% min. being a landlord. 20% is approx $26k in cash invested, so after anticipated vacancy (which sounds like it will be low for you, just remember its never 0% long term tenants die like the rest of us), cap ex, maintenance refinancing will get you to be true cash flow positive at around 10%ish if we are excluding the unit you live in. If I mistook it and your not living in either of them, regardless still refinance....
I have an SFR (single family rental property) owned outright that im debating on getting a mortgage on simply because rates have gone back down so much. If you look at history these sub 5% rates are not typical and may not be seen again for a very very long time.
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IMO cashflow is king, nothing helps you sleep better then stability. I would refinance.
you said owner-occupied, so your living in one of them? if thats the case then your occupying a unit worth $1425/month? if thats the case then I would say the property itself is meeting/exceeding the golden 2% rule.
Ultimately the question is what do you want as a cash on cash return. Most RE investors feel your COC return should be somewhere between 10% and 15% min. being a landlord. 20% is approx $26k in cash invested, so after anticipated vacancy (which sounds like it will be low for you, just remember its never 0% long term tenants die like the rest of us), cap ex, maintenance refinancing will get you to be true cash flow positive at around 10%ish if we are excluding the unit you live in. If I mistook it and your not living in either of them, regardless still refinance....
I have an SFR (single family rental property) owned outright that im debating on getting a mortgage on simply because rates have gone back down so much. If you look at history these sub 5% rates are not typical and may not be seen again for a very very long time.
no- the rental total is $1425 for the whole house. Rent is low and taxes are high here.
Downstairs is below market rate. $695.
Upstairs $730.
I currently occupy one of the upstairs rooms, and have had discussions with my roommate in the past about renting the whole floor to him. It would take approx $12,000 (today) or $11,000 delayed a few months to reach 20% equity and refi to a lower rate and would also eliminate PMI. On a 30 yr fixed, this would save ~$205 / month. $205 / mo is 22%. No brainer? I'm just not sure if I'm doing the math right.
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Fixed. Absolutely get a fixed right now. We may never see this low a rate again in our lives. When QE stops in the next year or two loan prices are going to go up.