Joined: 12 Jun 2013
Location: Orange County, CA
Own 3 properties, Refinance one of them?
Hey everyone, I appreciate any input that you can provide.
Own 3 properties, 1 house (worth 800k), 4 unit apartment 1 (worth 760k), 4 unit apartment 2 (worth 760k).
House - 116k at 5.375%. Maturity 11/17
4 unit 1 - 209k at 6.25%. Maturity 1/18
4 unit 2 - 534k at 6.625%. Maturity in 23 years
Credit line - owe 248k at 3% variable
I was thinking of refinancing just the 4 unit 2 because it is at a high % and I owe a lot. Unfortunately my credit rating is bad (600's). Should I do it?
Wed Jun 12, 2013 3:49 am
coaster Senior Advisor
Cash: $ 1626.30
Joined: 11 Oct 2005
Rates are very low but credit is very tight. You probably can't......but.....those are pretty high rates on both the four-units. Depending on how much you're willing to front for an app it might be worth trying, at least. If it was me, I'd want to get those rates down and fixed.
We have a guy here who's a long-time rental property owner; hopefully he sees this and gives his opinion.
Best wishes and good luck.....
Wed Jun 12, 2013 4:05 am
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
I would refi the home - get about a $600,000 30 yr <4% Fixed Rate loan. (the jumbo limit in Orange is $730k so not an issue). The payment would be $2900/m.
Use the $484,000 cash to pay off the Unit #1 $209,000, that gets that payment stopped (and offsets most of the extra $2000/m that you'll be paying on the house). So your cash-flow will be about the same.
Use the remaining $275,000 to pay-off the $248,000 VAR loan. That gets rid of your consumer credit, helps your credit situation, and avoids the risk of a VAR loan.
As for your 6.625% note, keep it for now. Even in good times and with good credit, about the best you can do is drop the rate by one point (one point is about $350/m) - helpful but not a game changer for you. But it might be worth a try in a year or two after yuour score builds and things settle out.
And it depends on other things that you have - new cars, car loans, CC laons, etc.
The risk-premium difference between OwnerOccupied loan rates and NonOO rates is about 1.5% - ie, about 4% for a home & 5.5% for a NonOO (my lowest on is 5.75% & I have good credit). So IMO you won't be able to do much better on your two NonOO properties. Most of your available equity is in your $800k home, that is where I would go to raise capital.