Cash Out Refinance Investing

[Nathan Frost]

Hi, I am trying to see what has worked for other investors and which strategy seems smart.  I have lived in my primary home for 10 years and could cash out 40k to buy 2 more rental properties locally.  Or should I look at my portfolio of 9 properties and see if I could cash out on those to buy 1 more property?  Most of my single family home rental properties were purchased in 2020 and 2021 so I don't think there is a lot of equity to pull there.  Wish I could use of my rental properties/equity as a down payment for my next rental purchase.  Any tips or advice is warranted.

[Steven Foster Wilson]

Quote from @Nathan Frost:

Hi, I am trying to see what has worked for other investors and which strategy seems smart.  I have lived in my primary home for 10 years and could cash out 40k to buy 2 more rental properties locally.  Or should I look at my portfolio of 9 properties and see if I could cash out on those to buy 1 more property?  Most of my single family home rental properties were purchased in 2020 and 2021 so I don't think there is a lot of equity to pull there.  Wish I could use of my rental properties/equity as a down payment for my next rental purchase.  Any tips or advice is warranted.

 I would look at what things are selling around your 9 properties. For my first property, I refinance again in the first 2 years because I saw the prices were going up. Review the comps and whatever makes sense go for it. Also, call as many lenders as you can to see who has the best rates/terms for you. 

[Erik Estrada]

I think the first strategy would make a lot more sense. A lot of portfolio lenders are capped at 75% LTV for a cash out. So if you don't have that much equity it may not make sense. But I couldn't really say without seeing your schedule of RE.

[Aj Parikh]

Hi Nathan, cashing out or opening HELOC is a great way to start rental property investing. I used a HELOC to start investing in turnkey properties out of state. I primarily invest in Cleveland in SFH and small multi family. Feel free to reach out if you want to explore that strategy.

[Kaci Hunter]

Two things

Check the comps in the area of all your rentals.  The areas may have increased in home values creating some more equity. 

What's the current interest rate on all your houses? Would giving up that interest rate for a new (most likely higher) interest rate be recovered somehow in the rents? 

[Mike D'Arrigo]

@Nathan Frost depending on where your existing rental properties are, you might be surprised to find how much equity there is. Many of our clients have been able to pull a lot of equity out of properties that they just bought 2-3 years ago. If you haven't already done so, I would get some comps to determine the values. In any case, HELOC's are a great way to freeing up capital for downpayment. Otherwise, all that equity is sitting in the properties not working for you.

[Nathan Frost]

Quote from @Mike D'Arrigo:

@Nathan Frost depending on where your existing rental properties are, you might be surprised to find how much equity there is. Many of our clients have been able to pull a lot of equity out of properties that they just bought 2-3 years ago. If you haven't already done so, I would get some comps to determine the values. In any case, HELOC's are a great way to freeing up capital for downpayment. Otherwise, all that equity is sitting in the properties not working for you.

 I asked my bank and they said they don't do HELOCs is there a way to get one at other banks?  My thought is to use equity from the rentals as a down payment on my next rental investment property or a line of credit.  What do you suggest in order to expand my portfolio?  I am trying to see which creative financing avenue I can use to add 1-2 more rental properties.

[Nathan Frost]

Quote from @Kaci Hunter:

Two things

Check the comps in the area of all your rentals.  The areas may have increased in home values creating some more equity. 

What's the current interest rate on all your houses? Would giving up that interest rate for a new (most likely higher) interest rate be recovered somehow in the rents? 

Rates right now are 5.5-7 for commercial loan.  I am trying to see what other avenues I can pursue for funding since my bank said they do not do HELOCs.

[Mike D'Arrigo]

Quote from @Nathan Frost:

Quote from @Mike D'Arrigo:

@Nathan Frost depending on where your existing rental properties are, you might be surprised to find how much equity there is. Many of our clients have been able to pull a lot of equity out of properties that they just bought 2-3 years ago. If you haven't already done so, I would get some comps to determine the values. In any case, HELOC's are a great way to freeing up capital for downpayment. Otherwise, all that equity is sitting in the properties not working for you.

 I asked my bank and they said they don't do HELOCs is there a way to get one at other banks?  My thought is to use equity from the rentals as a down payment on my next rental investment property or a line of credit.  What do you suggest in order to expand my portfolio?  I am trying to see which creative financing avenue I can use to add 1-2 more rental properties.

Some banks don't do them but there are plenty of others that do.

[Nathan Frost]

Quote from @Mike D'Arrigo:

Quote from @Nathan Frost:

Quote from @Mike D'Arrigo:

@Nathan Frost depending on where your existing rental properties are, you might be surprised to find how much equity there is. Many of our clients have been able to pull a lot of equity out of properties that they just bought 2-3 years ago. If you haven't already done so, I would get some comps to determine the values. In any case, HELOC's are a great way to freeing up capital for downpayment. Otherwise, all that equity is sitting in the properties not working for you.

 I asked my bank and they said they don't do HELOCs is there a way to get one at other banks?  My thought is to use equity from the rentals as a down payment on my next rental investment property or a line of credit.  What do you suggest in order to expand my portfolio?  I am trying to see which creative financing avenue I can use to add 1-2 more rental properties.

Some banks don't do them but there are plenty of others that do.

So shop around?  One bank said a line of credit.  How can one use a line of credit on good deals?  Trying to see how to add 1-2 properties with a line of credit.