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Personal Finances / Buying or Selling a Home


Subject:  Re: Consolidating Mortgages Date:  12/11/2012  4:25 PM
Author:  aj485 Number:  124468 of 128866

I have a rental that brings in 1250 a mont in rent but I am paying a fixed rate 7.5% int only for 10 years and then principal is getting added for a 20 year loan, for a total of 30 years. The payment right now is $1,436 and will bump up $600 in the next 2 - 3 years. I so want out of this loan and the tenet's are long term renters so it wouldn't be best to try and sell it.

Why not?

You are paying interest only on the loan, and are still cash flow negative by almost $200/month on just the interest, not including prop taxes, insurance and repairs/maintainance? Absent any rental rate hikes in the next 3 years, you will become $800/month cash flow negative by then on just the loan, not including everything else?

Even if you were able to refi the current balance at, say, 4% on a 30 year fixed, your P&I payment would only drop to about $1100/month - probably a bit more if you finance in your closing costs, so let's say $1125. That leaves you with $125/month to cover property taxes, insurance and maintainance/repairs just to break even.

Seems to me that this is actually a pretty marginal property from a cash flow perspective, especially given the inability to refinance away from the current loan without dumping more cash in. Even if you were willing and able to dump more cash in to refi, it still looks somewhat marginal - with today's rates, rental properties should really be at least break even after considering all costs. I would suggest looking at selling this property (maybe to your renters), and seeing if you can get into another property that actually has some potential for positive cash flow, if you want additional properties.

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