Updated over 2 years ago on . Most recent reply
Financing our second deal
My wife and I purchased a rental property in 2018 for $153k. It currently rents for $1800/month and we enjoy the positive cash flow as well as the market appreciation (~$245k).
We want to purchase our second property and are interested in perspectives on financing, including HELOC on our primary residence vs. cash out refi on the investment property. Ultimately, we would like to try BRRRR, but are wondering if we can skip the hard money portion of the process by cashing out on our investment property since it has appreciated so much.
We welcome any advice!! Thanks!
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- Rental Property Investor
- Hanover Twp, PA
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#1 Personal Finance Contributor
- Rental Property Investor
- Hanover Twp, PA
@Jeff Smith, if you cash-out refinance you will probably no longer cash-flow positively on this property. That is not something I would want personally. I want each property to stand on its own as a good investment.
What I would be thinking about is SELLING and doing a 1031 exchange. You could sell this one property and buy 2 replacement properties! By using a 1031 exchange the proceeds get rolled into the new purchase without you having to pay any income tax on the sale at this time.
This accomplishes your goal of growing your portfolio. You will then have MORE cash-flow to save towards another purchase or BRRRR deal.