Highlights -🏡

1. Property Value: $336,000
2. Loan Amount: $240,000 at 6.7% interest
3. Monthly Payments: $2,550 total
4. Rental Income: $2,300 per month
5. Insurance Increase: $600
6. Rent Increase Consideration
7. Future Refinancing Possibility

Key Insights -💡

1. Insurance Variability: 🏠 Explore options to reduce insurance costs by comparing multiple agents or revising policy coverage to lower expenses.
2. Property Tax Reduction: 💰 Consider appealing property tax assessments to potentially lower ongoing costs.
3. Rental Market Analysis: 📈 Research local rental rates to decide on a minimal rent increase, which can help manage tenant expectations and maintain a steady income.
4. Refinancing Evaluation: 🔍 Assess current interest rates and refinancing costs to determine if savings are substantial enough to justify the effort and expenses involved.
5. Tax Loss Strategy: 📊 Leverage any negative cash flow against income for tax benefits, which can help offset earnings and improve overall financial health.
6. Long-term Investment: 🏦 Consider investing in additional properties rather than focusing solely on mortgage repayment, as this could yield greater long-term benefits.
7. Interest Rate Trends: 📉 Stay informed about interest rate fluctuations, as favorable changes could present refinancing opportunities in the near future.

I’d break this down into a few parts and try to improve the situation from different angles. A $600 increase in insurance sounds like something you might encounter in Texas. If that’s where the property is, there might be some ways to reduce costs.

1. Insurance: If you’ve spoken to 10 insurance agents and they all say the same thing, there’s probably not much you can do. But if you’ve only spoken to 3-4 agents, I’d suggest contacting 10 in total or checking if there are unnecessary clauses in the policy. For example, coverage for personal belongings that’s higher than necessary or coverage for additional structures that don’t exist—these are just examples, and they might not save you much.

2. Property Taxes: Consider submitting a request to the county to reduce property taxes.

3. Rent: As mentioned, check the rental rates in the area when the lease is up for renewal and see what others are charging. Once you know the market rent, decide whether to raise it and by how much. It’s not a simple “yes” or “no,” but more about what’s appropriate. In my opinion, even raising the rent by $25 or $50 a month doesn’t make a huge difference but helps a little. It also signals to the tenant that rent will increase each year, preparing them for it. From my experience, it’s better to raise the rent slightly every year rather than making large jumps every few years.

4. Refinancing: You might want to check if you can get a lower interest rate now, say around 6.3%, which could save you about $200 per month. However, the question is whether the cost of refinancing is worth it. If you go through your bank, the cost might be lower or negligible. It sounds like there’s a $300 difference between your regular expenses and income each month. The steps I mentioned might help offset all or part of this gap.

5. Tax Benefits: It seems you currently have a negative cash flow of about $300 before depreciation. The next question is whether you can offset these losses against the income of one or both partners and leverage the losses against regular employment income. This is possible, legal, and not too complicated, but it does have some complexities and isn’t suitable for every income or job profile because certain conditions must be met. But it’s definitely an option to avoid “losing” the loss.

Good news: The Fed Chair gave a signal just a week ago that interest rates might start to decrease, so Option 4 might not be relevant in the short term but could be in the next few months to a year.

Buying another property is likely to have a much more significant impact on your future financial situation than saving a little on interest or paying off the mortgage quickly. Good luck!