As a new investor, I am seeking potential solutions relative to a property that I bought 1 year ago in Florida. This property I initially bought as an investment property in Florida that I would be able to “flip” quickly. I purchased a two bedroom townhouse in a good neighborhood for $217K. I paid $28K down payment and took out an interest only loan for $189K. Initially the payment on the loan was $698.00/mo. In addition, with an Escrow account I would cover insurance, PMI and county taxes. This turned out to be another $650/mo for a total of approx. $1,348/mo. The property value was intended to increase to approximately $260K in one year which it has. In addition, I have rented out the place using a property manager for $1300 per month of which 10% is used to cover property manager costs. I figured that since I live out of state I would not be of quick response to the tenants. However, currently I am paying approximately $1,741/mo. and the $1,170/mo in rent leaves a negative cash flow. The payment seems to go up every two months or so and refinancing is not a great option because the loan has a prepayment penalty for a period of 36 mo. from the loan inception of six months of interest on the amount prepaid in excess of twenty percent of the original principal amount at the rate specified in the Note. If I were to sell the place, then I would possibly have to pay the property manager for breaking the contract and possibly work out a deal with the tenant to get him to leave. I know that I was a fool for taking this loan but that’s why I’m interested in learning to generate money rather than losing it.

In order to truely give you the best answer I would have to ask if it was a HARD or a SOFT prepay.

Hard you pay if you refi or sell!

Soft you only pay if you refi. If you sell the property the prepay is null and void!

It is a hard prepay. If I were to sell, then I would incur in approx. $5K of penalty. Thanks for response.