OfflineI have a situation where my rental property went from making me $100 dollars cashflow a month in my pocket to actually paying $84 out of my pocket a month for one year because when I refinanced last year the escrow was screwed up. So the property is now COSTING me money. I had the property appraised and it came up short. So the only solution for me according to my mortgage broker would be this: The property was appraised at $165,000 and the payoff amount is $136,000.
1) Refinance to an Interest Only 5/2 ARM for $130,000 and costing me out of pocket $13,600 and
2) HELOC for $10,250 to pay myself back.
This would bring my total loan to $140k.
Now. This would now PUT $495.69 PER MONTH cashflow in my pocket for one year AND $311.69 PER MONTH for the next 4 years. This new Interest Only Loan would also allow me to pay the property taxes on my own twice a year instead of having it built into my mortgage like it is now.
What do I do?
You would have the cash flow, then as you get more properties you can pay down the property, and in 5 years possibly have it paid off or you could sell in that time and probably make a good profit off it - especially if the market values where the property is will be really good in 5 years time. Some markets will be really good in value in 5 years and some will take longer.
I must admit an Interest Only ARM makes me very nervous. Problem is I have a 30 year conventional making me $100 per month cashflow and starting this month for 1 year I actually have to pay out of pocket $85 dollars. I know in 5 years anything can happen but it's after the 5 years that worries me. It's the unknown factor that's killing me.
then you might be better just dealing with the negative cash flow until your escrow straightens out next year. If this is a short term play, then you should seriously look at the HELOC. But be careful, interest rates will be up dramatically in 5 years as the Federal Reserve tries to stop the runaway inflation. Plan accordingly.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
My dilemma is home values too. In five years we would have to hope that home values would have stabilized and hit bottom well before then. My concern is if home values plunge even more than now I could very well be stuck with a property I can't sell for a profit. Or not even being able to refinance. Risky.
I broke it down to weekly gains. it equals to one tank of gas per week. A high risk for one tank of gas. No?
you dont have to sell all properties!You can rent themout!I know I know you don't like renters well me either but they do build your self wealth!But just a thought because here in ALABAMA houses are not selling very well but renters are at an all time high!And without risk you are stuck in the same spotyou are in now! But with risk great things can and will come to you!Good Luck!Hey sorry I see your 1st post nowMMMmmmm!Keep a renter in there and perhaps raise your rent to cover your cost!
1) Refinance to an Interest Only 5/2 ARM for $130,000 and costing me out of pocket $13,600 and
2) HELOC for $10,250 to pay myself back.
This would bring my total loan to $140k.
Now. This would now PUT $495.69 PER MONTH cashflow in my pocket for one year AND $311.69 PER MONTH for the next 4 years. This new Interest Only Loan would also allow me to pay the property taxes on my own twice a year instead of having it built into my mortgage like it is now.
What do I do?
Cashflow = (495.69 * 12) + (311.69 * 48) = $5948.28 + $14,961.12 = $20,909.40 Cashflow over that 5 years
$20,909.40 - $13,600 = $7,309.40 total cash in pocket after the refi over those 5 years not including the property taxes.
Your new loan to value (136k/165k) = 82.4%
If you could come up with that extra 2.4% ($3264, making it qualify for the secondary market) + closing costs, you could get another conventional loan. That $3300 would be easier to get rather than that $13,600. It's possible that if you shop that loan around, you might get a different appraisal value and still be able to break even or better.
The more thorough the question, the more thorough the answer.
Please fill out your profile with as much info as you're comfortable with.
Thanks.
Thanks for the input. That Interest Only is scaring me big time. I don't mind risk but the risk ratio on this one seems to be too much for me to handle. Like I said I risk alot for one tank of gas gain. Doesn't seem worth it. I can shop around and see what else is out there. I don't like the Interst Only ARM 5/2/5 which is what it is. Tempted but scared.
Gang, where did you get this number from? $14,961.12
Andre'
On the sixth year my new rate for $140k would be 6.25%.
Gang, where did you get this number from? $14,961.12
Andre'
Hello!
the 5k number was for year 1 (12 months) and this 14k number is for years 2-5 (48 months).
Sorry for the confusion
The more thorough the question, the more thorough the answer.
Please fill out your profile with as much info as you're comfortable with.
Thanks.