Ok I’ve got a house that I’m trying to figure out the best strategy for in TX. I have about 100k in equity and will have it paid off in about 2-3 years. I’m also working on a refi from 5.3% to 3.5% which would lower my monthly payments to about $600 / month including mortgage, taxes, insurance (total payment). I’m also in the process of looking for another deal to purchase (which I have other cash for) to live in.
SO basically I would rent out / sale my current place and buy another place for place to live. So when I find the other place, I want to do one of these options.
OPTIONS:
Sale outright (have about 100k in equity)
Market rent out for approximately $1200 - 1300 with great cash flow
Lease with option to purchase OR wrap mortgage (still collect the cash flow + down payment)
OK so, at this point I’m leaning towards just renting or lease option however I have some questions about the lease option
Because of the refi and the low interest rate of 3.5, I would make alot on cash flow but what is the acceptable interest rate to charge? If I charge 8% interest on the market value of the house, the house payment is still low. Can I charge MORE interest (like 10%) to equate to the market rent?? Or would that turn away people from purchasing?
So you’ve got a place that will be paid off in 2-3 years and you want to refinance it and suddenly owe payments for 30 more years on it? Have you thought this through carefully?
It’s a 15 yr not 30. The reason it will be paid off early is because of the refinance and because I pay extra towards it each month. If I paid the minimum, it would take me 10 yrs to pay off. The refi will lower my monthly payments by $400.
Ok to get a clear answer I shoud give more info… It’s a 160k house and I still owe about 50k. Paying extra each month, it won’t take but a couple years to pay off.
The original plan was to rent out after refi for more cash flow / buffer, but then I got to thinking about other options. If I sold outright the refi is pointless obviously so most lilkely I won’t be doing that.
Moreso I was looking to rent out or owner finance it.
Pay $600/month in mortgage, taxes, insurance and rent out for 1200-1300
OR
Finance it out for 10% down + 8-10% interest on a 3.5% loan collecting the down, interest, and payment
It really all boils down to what you want to accomplish. You seem to know your options so it’s really up to you.
Do you want monthly cashflow & depreciation? If so rent it out or sell it on terms. In my opinion the refi at 3.5% seems like a good idea if it increases your monthly cashflow by $400. My philosophy is that cashflow is better than net worth most of the time. I assume you’re looking at doing a rate & term refi but heck you could even pull some cash out and still bring your payments down.
Or do you want a chunk of money to pay bills or put to work in another investment vehicle? If so, sell it for cash. Personally this would be my choice, assuming you won’t owe taxes on the proceeds. Here’s what I’d do with the money: I’d buy a bunch of houses subject-to, then turn around and sell them on rent to owns and/or work for equity. The market has bottomed out IMO, now is the time to stockpile inventory. By the time the market turns you’ll be a wealthy man.