sacrifice cashflow for cashout refi?

Question

Would you sacrifice $200 a month cash flow on 1 property for $30,000 cash out refi?

The property would still cash flow but would not be making much then if I cashed out max. Rate would be around 4.7 fixed 30 year.

Joe Villeneuve · Answer

Yes, and maybe...under these conditions:

1 - The remaining cash flow meets your minimum cash flow per house (everyone is different here, and the market you are investing in plays a role.  Mine is at least $300/month)

2 - You have something to do with that cash from the refi...that doesn't include spending it.

3 - You reinvest (this isn't spending it) the cash out from the refi into your next house.

If all three conditions are not met, then I wouldn't do it....until all three are met, then I couldn't do it fast enough.

Joe V

Account Closed · Answer

I find it makes sense if the property has a strong tenant and you have a place to invest the $30k.

Joe Villeneuve · Answer

Jimmy S. You're looking at it wrong.  As I look at your numbers, and assume I'm calculating your payment on $30k correctly, your new CF would be $44/month.

Your monthly payment, or what you are "losing" in CF every month is $156 ($1872/year)....but you have $30,000 already "spent" in the equity in the house...doing you no good.

Based on the above numbers, it would take you 16 years to break even.  You would be recovering that $30k over 16 years in $1872 increments/year.  You're not losing $1872/year..you're recovering $30,000 at one time.

Let's compare what you would have "spent" over the course of a year for these tow options:

Higher Cash Flow and no REFI          $30,000 - $2400 (12*$200/m) = $27,600REFI with lower CF                             Nothing...you're just getting lower CF

Now, having said that, I wouldn't do this because this wouldn't meet with all three of the criteria I mentioned earlier...specifically #1.  My min./month CF is $300.

Joe V

Jimmy S. · Answer

yes all 3 would be met but it always hurt to give back cashflow every month.  I would use the money to buy another investment property. I might take a few months or more till I find a good deal on my next investment property.

sacrifice cashflow for cashout refi?

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