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.

© Kevin Schill 2018