Would you refinance to pull equity out?

Question

I’ve got a question that hope I can get some guidance on. I currently have a loan on my current residence that runs a tad bit over 700 a month, with a 5 percent rate. With me currently looking to buy my first flip/ rental, would it be smart or not so smart to refinance since I would be going from 5% to 7%? I’d be pulling around 80-90k out, and have around 35-40k to add to buy a property. Or would it be better to go the route of using a hard money lender who will fund the whole deal, all I would need to do is find the deal, and fund the rehab? When I eventually rent my current property out (which will be a while since we have animals and a mini farm) I see no issue renting it for 14-1500 a month so cashflow on it after the refinance shouldn’t be an issue.

Jaron Walling · Answer

@Robert Proctor That's wonderful and a great situation. Outside of the animals I'd focus on the numbers and 5 year goals. Idk your age and professional skills but time valuable. The more you have the better.

We also started a family this year, but I have conversations with my wife about finding/buying/creating opportunities for REI next year. If you have a significate other in your it's so important to lay that ground work.

Robert Proctor · Answer

@Jaron Walling I bring up the current situation of the farm and animals to say that I plan on staying in the current property a while, but I would eventually just get rid of them once we planned on moving. Not staying on the property because of the animals, we are staying because it’s directly beside my parents and we plan on having kids soon, so grandparents close by would be extremely helpful, I should have worded that differently. And as with strategy, I’m looking to buy and hold mostly, and potentially flip some that may not cash flow as much.  As with shooting the current property in the foot, that’s why I’m asking for advice.

Robert Proctor · Answer

Yea it is! Yes me and my fiancé(getting married in April) have discussions on getting started in real estate almost on a daily basis. We have the same mindset and have a 5 year in place, minus figuring out the exact details on how we will do it! Just taking in as much info as possible and went to our first local real estate meetup last night, which is where I learned about the hard money lender. They informed us that they will help with the numbers and ensure the number work for us and them, so That could be a great option which I’m leaning towards. Just exploring options at this point and getting a team together.

Jaron Walling · Answer

@Robert Proctor "I’d be pulling around 80-90k out, and have around 35-40k to add to buy a property." - It really depends on what you can do with this money. It depends on the numbers and strategy.

Without a prospective opportunity (what ever that is) it's hard to judge a ReFi into HIGHER rates. You're also shooting the current property in the foot as a future rental if that's the plan.

35-40k is good money. It's not life changing but it's more than I had when I started. Whenever I see post like this I question the persons strategy and/or mindset. If you want to build a rental portfolio you'll find work-arounds to do it. You'll make sacrifices within a 1-2 year time frame. You're talking about animals and a mini farm. Those are hobbies that take time and money; none of which equates to a future rental.

Would you refinance to pull equity out?

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