Refinance to take equity out and buy a new property with it?

[Nicholas A.]

I bought a property in May 2023 for $289K, putting 30% down and locking in a 6% interest rate. I self-manage it, and my tenants currently pay $2,475/month.

Since purchase, the property has appreciated to an estimated $320K–$350K. I'm considering refinancing with a DSCR loan, which could lower my rate into the mid to high 5% range. A reappraisal at today's values would let me pull out around $20K in equity, which I could use toward another rental property.

The trade-off is cash flow. Refinancing would reduce my monthly net cash flow to around $200–$280, meaning lower ROI and thinner margins.

My gut says it’s worth it since the additional property could generate more cash flow than I would have without refinancing, but I’d like to hear from others who’ve been in this situation. Has refinancing to scale worked out for you, even at the expense of immediate cash flow

Thoughts?

[Erik Estrada]

Quote from @Nicholas A.:

I bought a property in May 2023 for $289K, putting 30% down and locking in a 6% interest rate. I self-manage it, and my tenants currently pay $2,475/month.

Since purchase, the property has appreciated to an estimated $320K–$350K. I'm considering refinancing with a DSCR loan, which could lower my rate into the mid to high 5% range. A reappraisal at today's values would let me pull out around $20K in equity, which I could use toward another rental property.

The trade-off is cash flow. Refinancing would reduce my monthly net cash flow to around $200–$280, meaning lower ROI and thinner margins.

My gut says it’s worth it since the additional property could generate more cash flow than I would have without refinancing, but I’d like to hear from others who’ve been in this situation. Has refinancing to scale worked out for you, even at the expense of immediate cash flow

Thoughts?

 Hi Nick, 

I am curious to know where are you seeing DSCR rates in the 5s? Is this with a buy down?