Suggestions

I own 4 properties, 5 units, and I'm under contact on my first 4 unit building. The 4 unit has a 5th apartment in the attic that is partially complete. I was considering doing a cash out refi on one of my other units and use this money to finish the 5th apartment and bring my to about 800-900/month. I had planned, and my broker recommended I do a interest only loan on the refi and cash out to 90LTV, which is about 21k. I think 10k would do all the work I need done, would it be smart to pull the rest out and pay off some debt and lighten the load on myself...or is this money better reinvested?

Comments(3)

  • bnorton3rd October, 2004

    That will depend on your cash position. Also, I generally do not recommend anyone finance more than 70% LTV for their entire portfolio. Remember market rents go up and they go down.

  • dsharon3rd October, 2004

    Well, this was the reason for doing the interest only loan. My payment will only change by about $30 on this property which has great tenants and a nice location. The interest only option is for 10 years before the principle kicks in and the payment goes up. By then in this area especially I would think either the rents will be higher or if not the equity great enough to sell if I had to. I'm just trying to thoroughly understand why this is a bad idea.

  • bnorton3rd October, 2004

    It isn't necessarily a bad idea. But you want to make sure your entire portfolio is such that if rents go down, you are still able to cover the mortgages. If you do not have much cash, then you will want to put this into your liquid cash, and maybe only use part of it for another investment. You may also want to do some wholesaling, or rehabs to better your cash position.

Add Comment

Login To Comment