Cash out refi vs 1031 exchange

[Lincoln Decklever]

Hello! I'm a side hustle investor of 5 single family homes (SFH). I created an LLC with 3 partners 5 years ago with the intent of buying 1 SFH a year for 5 years as buy & holds, with traditional commercial loans. After 5 years/properties, we plan on reassessing where we're at & what to do next. Well, we're there. We just completed our 5th purchase, which is now rented. We'd like to continue acquiring properties, & recognize we have quite a bit of equity in our 1st 3 properties we purchased due to timing & buying below market value. I'm curious if you all would recommend doing a cash-out refi on one of those properties to use as a down payment on another property, or if you would 1031 exchange into something else (multifamily, nicer property, etc.). 

Thank you.

[K S.]

I just did a 1031 exchange on an under performing condo a few days ago and it was a piece of cake. The transaction and escrow team did everything via docusign and only cost a couple thousand I think. I also have a cash out refi and was much more difficult as it's no different than applying for a mortgage. I was only able to do a 50% LTV which is fine because the home broke even afterwords. Your rate with a cash out will be worse because they assume you're using that for investment and not owner occupied unless you are of course.