Cash out refinance, when to execute

2 Replies

I'm looking into more investment opportunities and have already completed one cash out refinance on a rental, extracting 100k.. the rent i receive more than covers the payment difference. I have another property which i am working on extracting more equity from.. but i currently don't have any opportunities lined up.. would you complete the new refinance at current low rates and sit on money for some months until a deal presents itself? When is it a good time to execute a cash out refinance? Is it common practice to have a deal in the works when doing these?

Hi Andrew, that's a great question. My advice would be to hold off on a refinance unless a new purchase is right on the horizon. What you don't want to have happen is for you to pull out the money and have it sit in your bank account for months while you are looking for a new deal. Cash-out refinances are amazing tools, but you do need to time them right.

I think the optimum setup for you is to have maybe one house with a HELOC on it. That way you have access to some quick capital for a purchase and rehab expenses. Then you can refinance other properties (or the one you just fixed up) to pay off the HELOC. Basically, just have one house with a dedicated HELOC that is there when you need it, but you don't have to pay interest on it unless you use it. Then refinance other properties only when you need to.

Hopefully that helps!

@Andrew Witkowski

I’d pull the money out now while the value is high and rate low. A rise in interest rates could hurt your cashflow. I also like to have the money and then focus more on my shopping/deal analyzing. If you are one of those thinking values will drop at some point (I’m not), get cash heavy.

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