Should I use equity from my home refinance to make a cash offer

Question

I am currently in the process of refinancing my home. I have locked in a low rate and can pull additional equity out of the loan. The equity should be enough to help me pay for my first rental property with a cash offer.

Is this a good strategy? I would really appreciate any feedback I can get.

Anna Swartz-Lopez · Answer

@Gregory Stone

I know highly successful real estate investors that got started in exactly this way. It can be a great way to get your foot in the door.

Just be aware that as you move forward, you should look for ways to separate out your personal and business finances. Pulling equity out of your home means that if the rental goes under, your personal financial situation is very exposed. Again, this is a reasonable way to get started, but as you move forward, consider using an LLC or trust to operate your real estate business. Consider financing for rental purchases using that LLC. That builds a wall of separation between your personal and business financial worlds. The idea is that if something should happen that wrecks your business, your personal finances would be unscathed, and vice versa.

Just something to think about as you move forward. Best of luck!