August 12th, 2009 8:47 AM by Eric Fang
I have a client calling me to ask the following question,she has around 50k, and and she can use it either to purchase a rental or pay down her current mortgage and refito get a lower rate from 6.125% to around 5.125%(he has to pay down to be able to refinance).He needs my opinion about the strategy.
The first question I asked: Do you like to be a landlord?How much do you know how to be a landlord? Do you plan tomanage the property yourself or hire a property manager?Are you a handy person?
The reason I asked this question is that even though I ama landlord for a long time, hired some property managers beforeand manage the property myself sometimes. Though I learnt a lot about how to be a good landlord, and I still hate it. This investment is not for everybody, especially if you are busy.
But the refi maybe a good idea. To bring the 470k loan to 417kwith the rate reduction of 1%. It's an average of $4000(more or less)saving a year. With the investment of 50k, the return is around 7% to 8%, without the hassle of tenants. Is not it a good investment?