Refinance to purchase other properties - Posted by Shelley

Real Estate Investing
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Posted by Craig (IL) on September 23, 2003 at 21:46:17:

Refinanicng Now could be a problem when you sell. You would be taking several risks. By Refnancing Now your actually taking your profits on that property now. Refinancing means that you MUST get a good price when you sell. With typical selling costs, and a larger loan to pay off, you will have less options when you sell.

Secondly, you say your PLAN to do a 1031 exchange. But this is just a plan. You would be taking a risk now that you will actually be able to do an exchange. That means you will have to be able to use 100% of your “profits” to buy real estate. If your taking your profits now, will you have the money to do that? If not can’t, your 1031 will not work and you’ll have to come up with a bunch for Uncle Sam. Also, if you have never done a 1031, be forwarned that attorneys have to be involved and that means (naturally) expense. 1031’s cost a bit; be careful.

Why sell at all? Why not refinance now taking enough money so that your renters are paying for that money, you’re getting a tax break from your interest payements (making up, maybe, for your loss of the depeciation thing) and invest that money. Your property would be paying for your investing money. So, why sell it? From your post, I don’t see where it is essential that you sell property to do what you plan to do.

As far as finding properties that will cash flow, one methond is to look in areas where there has been little or no apprecaition for several years. Properties in such areas will sell for less, and cash flow nicely, even if you have to pay for property management because you live at a distance.

2

Refinance to purchase other properties - Posted by Shelley

Posted by Shelley on September 22, 2003 at 19:49:32:

We have a triplex we purchased 17 years ago. It’s worth about $220K and we owe about $104K. ( @ 7.5%) There’s about a $600 per month positive cash flow. We plan to do a 1031 exchange in about 2 years since the depreciation will run out in 3 years.

We’d like to invest in more income properties, but don’t have any ready capital. Also, due to one recent real estate adventure going south our credit is severely challenged. (Can anyone recommend a good mortgage lender for this situation–one that doesn’t charge an arm and a leg?)

I am in the process of reactivating my Oregon Broker’s license (which I never used to begin with) so I can participate in commission splits.

Would it be prudent to refinance the triplex and take enough cash out that there would still be a positive cash flow while giving us some cash to invest in other properties? (We’re looking at single family houses or maybe another triplex) Or, is it just best to keep the triplex and do nothing?

We’ve looked at some properties locally (Portland Oregon metro) and it doesn’t look to me like you’re going to be able to start out with any kind of positive cash flow unless you put a good sum down.

Any advice would be very much appreciated.