Refinance after Rehab and Property Tax (Chicago: real estate, rental, assessor)

[ChiCityChiCity]

Hi All,

Hoping to get answers from CPA in Chicago.

I bought a rental MFH for $360k last year in Chicago. I put $80k into it for a complete rehab. It's been fully rented and is generating very nice 20% CoC return (down + rehab cost). Prices have gone up quite a lot since I bought it. My agent ran a comp and he is confident I can get $550k for my rehabbed MFH.

I'm thinking to do a refinance to get the cash out up to 75% LTV for the next property purchase or I can also sell stocks to get the cash for the next property. What would happen to property tax after the refinance? Would it go up significantly because it will be based on the new appraised value? Chicago property tax has gone up this year and will continue to increase in the next 5 years.

Based on the calculation from the cook county assessor website, my new property tax at 550k value will be $14k compared to $8k I'm currently paying.

http://www.cookcountyassessor.com/Resources/Reside...

Does it make sense to refi?

[FAReastcoast]

I'm not a CPA, but own dozens of rental / investment properties in the city...If I were you I would definitely RiFi that building, and put it right back into another property. 20% Cash on Cash is crazy! Do you mind me asking what neighborhood you are getting those numbers? I haven't seen anything that high in the city.

PM me if you have any other questions, I do this for a living.

[knitgirl]

The city doesn't have access to your appraisal, but you would have had to get permits for the work, so yes, you will be paying higher taxes.

[damba]

Originally Posted by FAReastcoast

I'm not a CPA, but own dozens of rental / investment properties in the city...If I were you I would definitely RiFi that building, and put it right back into another property. 20% Cash on Cash is crazy! Do you mind me asking what neighborhood you are getting those numbers? I haven't seen anything that high in the city.

PM me if you have any other questions, I do this for a living.

Yes, those numbers are most certainly suspect.

[dtcbnd03]

You always cash out refinance for two reasons:

1. Your money is doing nothing for you at the bank. Put your money to work and invest it elsewhere. Why own a house outright for $100k when you can own 4 MFH houses with 25% down? Live in 1 and rent out other 3. This is how investors keep acquiring more and more properties. I've cash out refi the same MFH twice in the last 2 years to access more cash. BTW a cash out refi on MFH will require 70% LTV.

2. You want to maintain a healthy leverage on your current MFH because leverage is typically the only way to make more in real estate than the stock market. Leave 25% down and earn 4% levered returns on your money. Remember that on average housing prices never rises more than inflation. So again why own a MFH outright for $100k to earn 2% returns with inflation when you can earn 8% returns using 4x leverage with the same 2% inflation.

Lastly always always always get a 30 year mortgage...never get a 15 year or anything less than 30.