Growing your business: Partners vs Cash Out Refinancing?

2 Replies

Hello Beautiful People of BP,

I'm always attempting to think about the best way to keep progress moving forward, so I'm semi-planning out my next step(s). My current situation is not a bad one as I believe I have around 40-50% equity in my investments (put 30% down, increased rent, fixed damages), but I'm not real liquid. So although putting 20% down on a SFH or maybe a duplex or whatever would probably be feasible, I'd rather get a small portfolio or MF purchase. So I could not currently buy a whole lot with the normal 20% down financing without.... out refinancing, taking a partner, or both. 

Refinancing would essentially allow me to take out all cash I have in it (assuming it appraises for what I think it would). I believe it should still cash flow, but obviously much less if I did that. Pros: Full owner of more property, full control of decisions.  Cons: Not only decision maker, "riskier" since more leverage

Taking a partner would be an ok idea too. I personally do not have a person that has agreed to such, and I haven't been the best about networking (my plan is to do better with that). Pros: Reduce overall risk, have help to shoulder inevitable burdens, keep more cashflow from current property.  Cons: Have to find a partner, probably still will need to cash out refinance some equity, share decision making which could be a problem.

I figure most people have to do one or both along their way, assuming substantial growth is their goal. It is mine, and saving 20% down is not going to cut it. My only real concern about doing cash out refinance is that I haven't been doing this long enough to go through a downturn in the market. I don't want to set myself up for failure.

Which method do you prefer?

(thanks for reading my book) 

Originally posted by @Brandon Ingegneri :

Diluting your equity is your last play.  Just watch Shark Tank.  

 I get that and somewhat agree. However, not an apples to apples comparison. In shark tank, the entrepreneur probably doesn't have another "genius" idea. So what is given up, is given up forever. There's always more RE deals