40% Down to ensure good cash flow?

[Joe Ludwiczak]

Last year I opted to turn my primary residence into a rental and purchase a new primary residence. In the next year or so I’d like to acquire another single family rental property in my immediate area. At the moment however, the prices are so high that I don’t think I could get good cash flow with 20% down, even with rental prices elevated as well. 

My plan was to do a cash out refi on my current rental (ie my original primary residence) and I have enough equity there that I could take out enough cash to put down 40% down on the new rental I’d like to acquire. I’d still be nicely cash flow positive on the current rental and the 40% down on the new rental would set me up to be cash flow positive there as well. 

Is that a bad idea? 

[Jay Hinrichs]

if you had a big equity run up.. sell the owner occ and pocket the TAX FREE gains up to 250k single 500k married.. thats the best tax move.. now you have unfettered cash to go shopping with.