Should I Do a Cash-Out Refinance On My Primary? Thinking out loud

Question

Greetings Everyone,

I've been contemplating selling or doing a cash-out refi on my primary residence (Townhouse) here in Southern California and trying to capitalize on the equity my home has generated over the past couple of years.

I wanted to get some opinions from seasoned investors and see what would you do in my situation. My Real Estate goal is to buy and hold 10 doors and pay them off as soon as possible.

With that in mind here is my situation:

I recently was contemplating selling my primary residence (Townhouse) due to my growing family and rolling my gains into an SFR which would easily cover my 20% down payment and still have an extra $140K for investment purposes. but I dismissed the selling idea mainly because the areas where we could afford to live were areas we don't want to live in. Mostly due to commuting distances, schools districts not being up to par, and our mortgage would easily double.

At the same time that I was thinking of selling my house, I was able to lock my interest rate for the cash-out refi because the interest rates are going up in the coming months or years; and maybe then a cash-out refi may not be an option. Anyway, I would get about $140K out for investments and future buying power, with only a slight bump in mortgage (+$675), still keep a 61%LTV and if I ever decide to rent this place I would conservative cash flow around $300. Which I know is the way to go but I'm experiencing a mental block and pulling the trigger. my inside voice is telling me that I'm afraid to make a big move like this, of making a mistake and mismanaging the money, and not meeting or exceeding my real estate goals. My inside voice is saying to not do anything and keep my low mortgage payment, pay off the mortgage sooner and get higher cash flow when renting it out in the next 5 years.

Anyway, I'm thinking out loud and hope someone can relate or has been through this situation and can chime in with some investor experience and how to overcome these mental blocks!?

Below is what my refinance would look like if I do the refi.

Taylor Dasch · Answer

So you would cash flow $300/mo after the refinance? Man your goals are very similar to mine. I'm trying to acquire 10 properties in 5 years and then start paying them off- using flips to take out big chunks of the principal at a time. We both know this isnt the best way to go about real estate investing but this goal sits well with me. As far as your cash out refi. Are you an expert on your market with rents, ARV, rehab costs, etc? If so how much will 140k get you? I know in my market, 140k will get me about 4 properties that cash flow 300 each and most likely more if the deal is good enough and I dont BRRRR it. So if I could move and raise my expenses by 675 but get an extra 525 in passive income(1200-675) Then it seems like a good deal to me!

Should I Do a Cash-Out Refinance On My Primary? Thinking out loud

1 Reply