Is this a bad time to do a cash-out refi?

Question

Nadeem Alamgir · Answer

@Freeman SchultzIt really comes down to the deal. If you’re pulling equity to put into another property that cash flows enough to cover the higher debt, it can still make sense even at today’s rates. If you’re just pulling cash without a clear plan or strong numbers then yeah you’re taking on extra risk.It’s less about timing the market and more about making sure the math works with today’s payments.

AJ Exner · Answer

I think that fluctuation in responses shows the variability of real estate investing. What's good for one person might not (and probably is not) good for someone else.

I guess I can share where I am, I'm getting ready to refinance my investments because I had purchased one a little over a year ago and its already appreciated a decent amount and its sitting at 7.99% (still cash flows, but getting 6.25%) while the other is in a construction loan that won't mature until the end of the year, but I would rather have the cash now than the cash flow.

I do have one other that has some 'golden handcuffs' (tons of equity, 2020 rate), but at some point I have to reconcile that the cash now to purchase more investments will help me at this stage in my journey than to build it up slowly. I guess it would really have to depend not just on who you are as an investor, as it does where you are in your investing journey. At some point, I will not worry about building and expanding my portfolio, but rather in growing equity and cash flow.

Alas, I am not there yet, so I would say that you should refi. But I am a random internet man, so hopefully you have a good grasp on your goals and can decide based on that and not random internet people.

Good luck! Happy to help if I can

Casey Osborne · Answer

It really depends what you intend to use the cash out refi proceeds for. If you have a pressing need for the cash go for it. But if your goal is to reinvest or buy other real estate it may not be the best time given rates, prices being near all time highs, and  uncertainties with economy.

Frankie Vozzi · Answer

Freeman, great question a lot of investors are asking the same thing. What I’ve seen is that it’s less about “good time vs. bad time” and more about whether the refinance positions you for your next deal. Many investors still move forward with cash-out refis because the capital lets them scale, even if the rate is a little higher.

I sent you a DM, Let's connect!

Nadeem Alamgir · Answer

Agreed @Freeman Schultz

Freeman Schultz · Answer

That is the thing, no one can really time the market. It is more important to have a plan in what to do with the money and the numbers work out. A person is asking for trouble if they do not do that.

Freeman Schultz · Answer

Before the GFC, everyone was doing a cash-out refi left and right. There were a lot of people who were doing a cash-out refi because it was easy money, until the other shoe dropped.

The environment not very hospitable in terms of interest rates.

Is this a bad time to do a cash-out refi?

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