Investment Blog

Income Property Refinancing

With income producing property we are constantly trying to find ways to increase income and reduce expenses.  Refinancing a leveraged property at todays very low rates can be a great way to increase that income.

Lets say you have a loan on your duplex of $400,000 with a $300,000 balance, and this loan was at 5.25% amortized for 30 years.  Your current Principle and Interest payment is $2,208 a month.  If you refinanced that $300,000 at todays rate of 3.75% your new monthly payment would be $1,389 month.  This would be $819 month or $9,828 in additional annual cash flow.  If your current rents are $4,000 month this would be an effective increase in income of about 20%, without raising rents.

However, you do have to consider the cost of the loan.  If the loan fees add up to 1.5% + closing, recording, title fees you could be looking at an approximate cost of $5500 to get the deal done.  That said you would not realize this effective increase until month 8 of the loan.  Always balance the time you expect to hold the property with cost to refinance.

If you would like lender referrals that work with investor properties please give me a call.

Parents, Should you Rent or Buy for your CU Student?

College is a very expensive proposition these days, tuition even for in-state schools has been on a meteoric rise over the past ten years.  And this is only the start.  Rents are hitting all time highs and it could cost over $1000 month just for rent.  Wow, $48,000 just for rent while your child is at college, and that’s just the first four years.  

With a high school sophomore I too am starting to think about the best way to manage these expenses.   If you have a son or daughter attending the University of Colorado Boulder you do have options.  You could rent, or for some buying might be a great option?

Rent alone at the average price per bedroom of about $900 per month, is $10,800 per year.  In rough numbers a $210,000 2 bedroom condo would run just over $900 a month for PITI with 20% down at todays super low interest rates on a 5 or 7 year ARM.  Your son or daughter would then rent the other room to a friend which could come close to covering the mortgage.  Appreciation, cash flow, and equity build-up could save you thousands of dollars over a 4 year college career.

Here are a couple examples given the 20% down payment, current interest and rental rates:

2 bedroom condo with a purchase price of $210,000 would save approximately $21,000 by the end of the 4 years.

A 3 Bedroom single family home in Martin Acres close to campus would run about $450,000 and could net you about $86,000 over and above the cost of 4 years of rent. 

It’s best to look at each individual investor and determine their needs and look for a property that best fits those needs.  If you would like to learn more and work through a scenario that fits your specific requirements, please contact me at 303-579-2694 OR EMAIL ME HERE.


© Kevin Schill 2018