Refinance or let it ride

[DrPanda]

Hello,

I am fairly new to this but need some advice.
I have a Single Family home that has a market value of 260k. It is currently rented out for 1300/mth.
I have an variable rate of 1.45% and my monthly mortgage is $1000/mth(90% going to principle). The mortgage is up in 2012.
Do I refinance now and pull money out and invest in another property or do i let it ride until 2012?
Currently 140k left on mortgage, in 2012 120k left.


Tx
DrP

 

[NeilUttamsingh]

QUOTE (DrPanda @ May 9 2010, 10:55 PM) Hello,

I am fairly new to this but need some advice.
I have a Single Family home that has a market value of 260k. It is currently rented out for 1300/mth.
I have an variable rate of 1.45% and my monthly mortgage is $1000/mth(90% going to principle). The mortgage is up in 2012.
Do I refinance now and pull money out and invest in another property or do i let it ride until 2012?
Currently 140k left on mortgage, in 2012 120k left.


Tx
DrP

DrP,

The answer to your question, what ever it ends up being, should be consistent with what your long term goals are.
If you refinanced it now, and bought another property, does that fall in line with what you are trying to achieve?

You will no doubt get a number of opinions as to what you should or should not do here.

However, it all comes back to what you are trying to accomplish.

ie: how many properties do you want to buy?
does refinancing the property today get you closer to this goal?

Some things to consider, which will aid you in the decision making process...

 

[Thomas Beyer]

QUOTE (DrPanda @ May 9 2010, 08:55 PM) I have a Single Family home that has a market value of 260k. It is currently rented out for 1300/mth.
I have an variable rate of 1.45% and my monthly mortgage is $1000/mth(90% going to principle). The mortgage is up in 2012.
Do I refinance now and pull money out and invest in another property or do i let it ride until 2012?
Currently 140k left on mortgage, in 2012 120k left.
likely mortgage rates will be higher in 2 years ..

doing nothing is a good option if the headaches are low, the property in a city and area with upside and if it cash-flows after all expenses .. but selling is a good option too as rent of $1300 for a property worth 260K seems too low ! Where is this asset ?

 

[invst4profit]

I agree with Thomas on his suggestion of selling to free up the cash. Rent to value is way out of whack.
Considering return on equity, expenses, lost opportunities etc this property is not a good investment with the rent as low as it is..

 

[DrPanda]

QUOTE (ThomasBeyer @ May 9 2010, 11:02 PM) likely mortgage rates will be higher in 2 years ..

doing nothing is a good option if the headaches are low, the property in a city and area with upside and if it cash-flows after all expenses .. but selling is a good option too as rent of $1300 for a property worth 260K seems too low ! Where is this asset ?


This property is in Waterloo.

 

[housingrental]

I would sell it

 

[bizaro86]

I would only sell if you think you`ll be able to make a better investment with the money somewhere else. Remember, with Real Estate the switching (selling and buying) costs are very high.

Determine your expected ROI on your current investment, including cashflow, equity paydown, and your estimate of appreciation.

Then, determine your expected ROI on whatever you would do with the money, whether its the stock market, buying another property, or whatever. Include the costs of selling the property, and consider the potential tax implications. If the new investment is better, then sell.

Sometimes the grass only LOOKS greener on the other side.

Michael

PS. I`m not saying you shouldn`t refinance or sell, but the only rational way to make that decision is to sit down and compare the numbers involved in the different options available to you.

 

[markl]

I guess it all depends on your goals and what you want the property to do for you.

But when I look at this scenario I look opportunity cost. You have a $120k making you not much money a month after expenses. You are probably putting time and effort in on the property by managing it yourself I would assume? The question to ask yourself is what could I do with the money can I make a better return on it than it is currently making? Even after you pay realtor fees and taxes, you will be left with a sizable amount of money. Where even if you were to invest in a REIT say 8% or BCE 5% dividend return you would be putting more money in your pocket with less stress. If you were to do deals on your own I would suggest becoming a REIN member and educating yourself as there are far better returns to be had out there for those investing for themselves.

Regards,

 

[jcab256]

If you have ~$120k in equity in the house, why not get a HELOC, and use it for a downpayment on another house?

This assumes a few things:
- you want to acquire more property
- this house is in an area that you feel will appreciate - or at least not depreciate
- house is in decent condition

 

[Nir]

QUOTE (DrPanda @ May 9 2010, 08:55 PM) Hello,

I am fairly new to this but need some advice.
I have a Single Family home that has a market value of 260k. It is currently rented out for 1300/mth.
I have an variable rate of 1.45% and my monthly mortgage is $1000/mth(90% going to principle). The mortgage is up in 2012.
Do I refinance now and pull money out and invest in another property or do i let it ride until 2012?
Currently 140k left on mortgage, in 2012 120k left.


Tx
DrP

refinance and buy more.

 

[Thomas Beyer]

QUOTE (investmart @ May 11 2010, 10:40 PM) refinance and buy more.
but only if
a) the re-financed asset cash-flows, and
b) you are comfortable with more debt, and
c) you have the time and desire to look for more deals and manage them well !