Rental Property Investor · Palm Springs, CA · Member since 2016 · 138 posts · 38 votes
I have a vacation rental that I owe $370k on with a 3.75 fixed rate. Home is worth 800k now. I am considering doing a cash out refi with 80% LTV at a 5.25 fixed rate investment loan. This would allow me to pull out $250k and buy another vacation rental. The home would still cash flow very well even after the cash out refi.
What are your guys thoughts on this. Worth taking the extra interest rate to pull that money out?
I have a vacation rental that I owe $370k on with a 3.75 fixed rate. Home is worth 800k now. I am considering doing a cash out refi with 80% LTV at a 5.25 fixed rate investment loan. This would allow me to pull out $250k and buy another vacation rental. The home would still cash flow very well even after the cash out refi.
What are your guys thoughts on this. Worth taking the extra interest rate to pull that money out?Thanks
Pablo
Always go for the additional rental if the cash flow is there.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
4y
@Pablo Flores Hmmm, so if you have your heart set on another vacation rental, and if you don't have any other alternatives to get the money necessary to do so, then yes. But a lot of us aren't focusing on acquiring properties in this fashion. Many of us are using the BRRRR method. Using $250k to buy 1 property...I mean, I could probably acquire about 15 properties with that amount. It's a different strategy but if I only need $2,000-$10,000 to buy a property that means that I don't have to take a cash out loan of my own property. There's no right or wrong answer to this. It's whatever works for you personally. But that's the other method I would say to at least think about. Hope all of that makes sense.
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Pablo Flores Do you have any other sources you could leverage ? ( primary home ?) would your plan on the 250K for the new rental be to buy the property oputright or to use the 250k for the down payment and to borrower the balance ? Double check the loan to value as getting an 80% ltv on a cash out rental loan seems unrealistic
Investor · TX · Member since 2020 · 57 posts · 60 votes
4y
It's all about the cash flow. If it still cash flows, absolutely pull the dead equity out and reallocate to another property. Your cash flow might even go up overall since you have 2 cash flowing properties. I typically cash out refinance my properties every 5ish years and leverage it out into other investments properties. It really accelerates your net worth and equity.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
4y
@Pablo Flores dude pull that cash out while you can. As long as the property you refinance can service the new debt AND your total cashflow increases after the new acquisition (it will!) then YES.