To cash out refinance or not? I kept it as short as possible while also providing the numbers/background.
-I moved back into this house because it was cheap to live in (1,100 a month, 3.25% interest rate, FHA loan) after living in a house that was 3K a month and selling it just in time before prices started to decline recently.
-When this house I’m living in now was a rental rents were high enough after 3 years that it shows a profit even on paper (cash flow about $700 a month).
-Not a huge fan of one of the neighbors (section 8) but location is otherwise good, least issues of any house I’ve lived in to date. Plus I can bring the city down on them when they get out of hand.
-House needs a new roof if I keep it more than another year, whether I live in it or rent it out aside. It will also need a new exterior paint job and furnace soon, and the plumbing is galvanized so it will eventually fail too. Point is, if I don’t sell in the next year or so, I have major capex coming (10K roof, 10K furnace, 10K plumbing pipes, 5-10K exterior paint).
-If I cash out refinance, my payment goes up to $1,700 a month (5% interest rate), or about $1,200 a month after principal pay down and tax benefits and I get 110K cash out to set aside for more investing down the road (have significant cash reserves for that now though too). Right now I’m paying about $1,100 a month to live there, but after tax benefits and principal paydown I’m paying closer to $750 a month.
-I would not mind buying some acreage with a small house near where I live now, but it does appear the market is correcting even if just temporarily, and interest rates are high, so it doesn’t seem like a good time to buy right now. Ideally waiting for a market crash/bottom.
-I could in theory sell this place and put the 200+K in equity as a DP on another property that has acreage and thus I would have an ideal home and a relatively small payment still, assuming I buy a place for 500K or so.
-I have multiple other houses that are rentals. I am planning on 1031 exchanging another one in the coming year. I could cash out refinance of of them too, they all have 200K+ equity in them.
-Also note, I'm financially independent while living in this cheap house or any paid off property really, and I can pay this house off any time (including most of my other rentals).
So what to do? And why?