My primary house is now worth 1.1 million. I have $225,000 loan left. I am thinking of doing refi to cash out the equity. I talked to my loan agent, I can cash out 825,000. After pay down the previous loan, I will have $600,000 left. I am planning to use this money to purchase several investment property. I want to cash out now, since I feel that my house in sillion valley is very high now. I am afraid that the house price is going to go down, and also the rate is pretty low now. But my other concern is that if I don't find property to buy immediately, I end up paying a lot of interests. My current loan is 15 years fixed with 2.85 rate for $225,000. So the interest is pretty low. I do have $200,000 reserve in cash in case things go south. Shall I do the refi? Is it too risky?
It would make the most sense to locate the property(ies) that you want to purchase in your first round of acquisitions prior to funding the refinance on your primary residence if you are worried about carrying the interest with no returns. As you know it is not an exact science though and shopping for investment properties with your cash already in the bank can open some doors that would otherwise not present themselves to you. That said, there are private lending products out there that can alllow you to shop for properties with a lot less cash in hand than you might think you need. Do you plan to buy and hold the new investment properties or rehab/ resell them right away? Do you plan to utilize any investor/ private money financing (debt) to go with your $600,000 to amplify your returns and increase your ability to buy?
There are second mortgage (heloc) products available that could save you quite a bit on interest carry costs if that is a major concern. That said, with the correct planning and budgeting you can plan for your costs in a way that the cost of the money is something that is not scary or concerning. Please let me know if you would like some consulting on this topic.
I had my house paid off when I decided to refi, and go full time in real estate. It is risky but the way we look at it is - my wife has a masters, I have a bachelors, we have both had careers. If something goes sideways we can make it back faster then it took us the first time. The real risk was continuing to work a job.