Investor · Ambler, PA · Member since 2016 · 27 posts · 2 votes
I'm considering doing a cash-out refinance on a rental property with a good amount of equity. I'll be able to pull out a little over $200k. My new P&I payment will be about $900 more per month, but rents will increase by about $600. This will be after renovating and renting out the last of 4 units in a 4-plex. My question, though, is this - since my debt service will increase and my gross rents will decrease, will pulling this amount of money out affect my debt-to-income ratio to the point that it would be detrimental to my ability to obtain a mortgage on my next rental property? Or is there a general rule-of-thumb or guideline that basically says "hey, if you're cashflow positive after all expenses including vacancies and setting aside reserves each month for capital expenditures, you're good."? The property will still cashflow very nicely after this cash-out. I know, a lender would have to calculate all of that, but just wondering what your own experiences have been, or if there's a general rule of thumb, or if I shouldn't even worry about it, go for the cash-out, and reinvest.
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
5y
There are a lot of moving parts here- your DTI is one, and depending on your situation, lenders may or may not count your rental income towards your DTI. Your total debt could effect your lendability too. I'd check with your lender and ask them to run some scenarios for you to see what your hypothetical situation would look like. You might look in to a HELOC too- the terms are different for multis, but it might be a better option for you.
Investor · Ambler, PA · Member since 2016 · 27 posts · 2 votes
5y
Good call with getting a line of credit on the subject property as opposed to cashing out. It's so simple, but I forgot I even had that option because I was so focused on cashing out. I'll look into it!