I am kind of disappointed this morning since I found out yesterday that the refinance on the rental homes would not work. Apparently, my credit score is not good enough. Ever since 2008, it has been incredibly difficult to get credit so I will be focusing on getting out of debt instead.
Ultimately, it turns out that the net impact on the monthly cash flow won’t be all that different without the refinance. That is because I had to have 2 appraisals and one came in below the expected amount. As a result, I had set aside $10,000 to bring to closing in order to save about $650-$700 per month through decreased payments.
Now that the refinance won’t be going through, I will using that money to pay down a credit card balance in order to save over $2300 per year in interest. Once I get this card paid off which should be in the next few months, I will save almost $800 per month in cash flow which can be added back into the budget. So all is not lost with plan B.
Then once that card is paid off and I get a little more credit card debt eliminated, my credit score may very well be in a better place that I could refi the rental houses, decrease my interest rate and my term. I don’t anticipate rates moving up any time soon. I would think that I have a year or more to get a better interest rate.
If not and rates start to increase, that would mean that the economy is heating up which will only help my retirement account investments in the stock market. So I look at it as a win-win.
With this behind me for the time being, I can now focus on getting the business transaction complete and meeting my 2 goals for this year which are losing weight and paying off debt. In fact, I am about to launch a blog solely devoted to working my way out of debt which should bring some increased accountability and motivation to the equation.
I will let you know when it is up and running.
Here are the recent carnivals that have included articles from my blogs:
Boy, have I been busy these past two months. The activity has kept me from posting as much as I would like, but it is more important that I get some of these things done. I don’t have time to go into all the detail, but will share just a little bit. The good news is that I will have additional material for posts in the future.
These are the items that have consumed the majority of my time away from work:
1. Canceling a Timeshare Contract
There is a lot to this story and I will share every detail later on when I have more time. Actually, I might just end up copying and pasting some of the letters that I have sent. The short version is that my wife and I got sucked into a presentation while trying to get discount show tickets in Vegas. We left unsure about the purchase after signing paperwork. We tried to cancel and they tried to run the transaction anyway. We finally got it cancelled. No money has yet changed hands, but I do have a few loose ends.
2. Refinancing Rental House Mortgages
I have been working to refinance 5 rental houses. Of course, this involves a ton of paperwork, signing a bunch of stuff, arranging appraisals with the tenants and contacting everyone so we are all on the same page. The plan is to decrease the interest rate, decrease the term and decrease the monthly payment. So far, all is going according to plan but one of the appraisals came in lower than I would agree with. It means more money at closing, but the savings will be big.
3. Negotiating Purchase of a Business
I have also been working to negotiate the purchase of a local business. This occupies some time as I have reviewed the books, met with the owner and spent a weekend back and forth negotiating points and creating a framework for our agreement. The next step is to meet with the banker on the Monday after I get back from a South Carolina golf trip. I am really looking forward to the trip as the time away will be very relaxing.
Going forward, two of these items will no longer occupy a bunch of my time. Now if we purchase this business, I will have to spend some time each week looking over and reviewing numbers and signing checks. But even if it is five hours per week, it should still be worth it. I can share more details later as well.
Here are the most recent carnivals in which my blogs have participated.
CFM is Cash Flow Mantra (which is this blog)
GPM is Grand Per Month
PT is Penny Thots
A little while ago I mentioned that I was looking into refinancing some of my rental property. I figured that interest rates had gotten so low it was worth looking into and seeing what might happen. I think there is only one way for rates to go and that is up. Well, life got in the way and I had to get some other things done first as I am sure that most of you know. But now, I have been able to begin looking into the refi again.
It turns out that the mortgage guy at the bank left so I am with a new guy. I have only spoken with him on the phone, but I think I like him better. He is fairly responsive, and I think we can get this done.
I made myself a spreadsheet at the end of October with the data from all 6 of my rental houses. One is the place we used to live in before moving 12 years ago. We have a second mortgage on it so there is not a lot of equity. But the other 5 are the ones that I will be able to refinance. I figured that while I was decreasing the interest rate, I would also look into decreasing the term.
Currently, my rates run from 6.38% to 7% with remaining terms of 21 to 23 years. I had him look at 20 year and 15 year numbers, and I am liking what I see.
For the 20 year term, the interest rate would be 4.25% and I would have to bring just over $13,000 to closing. The payments would decline by about $948 per month. It would take about 14 months to break even and get my cash back.
For the 15 year term, the interest rate would be 3.125% and I would have to bring $10,500 to closing with payments being reduced by $659 per month. It would take me 16 months to get the cash expense back. But I would save 5 full years of payments at the back end compared to the 20 year mortgage. And I will definitely save a bundle compared to my current situation.
The savings could be used to pay some of my other debts which I am working aggressively to get under control. Right now, that seems like the best use of cash right now. I would prefer not to bring that much cash to closing, but consider the return on investment, and it is a great deal. If over the first year, I save $7908 in cash on my $10,500 investment now, my cash on cash return is just over 75%. Who wouldn’t take that kind of return on investment? So it makes abundant sense to get this thing done.
Which is why I hoping the refinancing on the rental houses all works out.