Should I refinance/cash out my primary residence to purchase a 4 plex?

Question

Greetings!

I have a primary mortgage ($195k) and to be paid off in 8 yrs. I'm interested in refinancing/cash out $200k for a down payment for a four plex. The 4plex is selling for $999k and cash flows $3k. If I do the refinance, I will have two 30 yr mortgages. Is this a worth while real estate investment strategy and opportunity?

Ruben Canales

Antonette El Baz · Answer

Refinancing or cashing out your primary residence to purchase a 4-plex could be a worthwhile real estate investment strategy, but it depends on your specific financial situation and goals. It's important to consider the potential risks and benefits of such a move, to determine if it is a good decision for you.

In your case, you're looking to cash out $200k for a down payment on a fourplex that is selling for $999k and cash flows $3k. That is a positive cash flow, but you should be aware that the property's value may not appreciate as much as you would like, and you will also have to consider ongoing expenses, such as property management, repairs and maintenance, and property taxes. Additionally, you will have two 30-year mortgages, which means a longer time period to pay off the mortgages, and that may have an impact on your long-term financial goals.

Overall, it's a good idea to consider all the factors and to consult with a financial advisor or real estate professional before making a decision.

Drew Sygit · Answer

@Ruben Canales Jr what will be your ROI on the 4plex?

What you should be asking yourself is, if you borrow funds @ x%, what ROI can you get on investing those funds including the interest cost of the funds?

L Lee · Answer

I do not believe a primary residence should ever be used in RE transactions. With that said, I would recommend looking for private funding or a funding source that would carry the cost and rehab. I would also try to negotiate the price down, so you're starting with more equity in the deal. BUT, I'm not new but newer to real estate investing and have made some costly mistakes that I have learned from. A 4-plex could give you a nice cash flow and like Antonette mentioned above, there are a lot of expenses and maintenance to consider. If the number work, go for it. But if the numbers don't, market changes, value changes, or tenant headaches, you may find yourself with 2 properties in jeopardy. My 2 cents!

Should I refinance/cash out my primary residence to purchase a 4 plex?

Should I refinance/cash out my primary residence to purchase a 4 plex?

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