Pros: you get cash back to put towards another investment.
Cons: your PITI increases making monthly cash flow worse.
If you bought the property with refinance in mind, then do it and turn one into 2. If it’ll make you negative cash flow, then maybe take out less or look at a different exit strategy. Have you run the numbers yet?
Pros: you get cash back to put towards another investment.
Cons: your PITI increases making monthly cash flow worse.
If you bought the property with refinance in mind, then do it and turn one into 2. If it’ll make you negative cash flow, then maybe take out less or look at a different exit strategy. Have you run the numbers yet?
@Gabriel Williams there are a lot of factors that can make your pros and cons better or worse. How much money you have in reserves, how much did you put into the rehab, what kind of loan and terms you used to purchase the property in the first place, was it private/hard money. How your market is where you live and what type of property is it, SFR or Multi unit. Here in California SFR's don't cash flow well unless a huge discount. If you put a bunch of money on the rehab and don't refinance, how long is it gonna take to get that money back in rent as well as closing costs you paid for. And if you have a lot of money in reserves to keep investing then maybe you might not want to cash out refinance. What's the market doing as well, do you feel it's growth for appreciation is over with and it's peaked? Maybe not cash out then as well and push the limits. Lots to think about sometimes with these things.
Good point Jason. I guess my thought was only take an amount that allows me to still cash flow something. My original thinking was even if I just break even I still have the asset which is a sfh, with a view of Lake Michigan and it’s costing me nothing.
@Gabriel Williams
Pros are that you got some dough to buy some moe property! Con is you have a larger loan amount to take on that will hopefully be covered by your rental income.
Thanks Gus! I'm waiting on an appraisal to see if it's even a possibility. We have a lot of equity in the home already so a HELOC is also something we may consider.
The cons are how long will it be for you to find another property? You are paying money out every day you do.
Do you have 2 years of reserves to sit out a recession? This is a goal you should strive for to keep yourself solid in bad times BEFORE you take out more leverage. Most people ignore this and gamble away.
The pros are this is a time when money is liquid and values are high - better to get it now.
@Gabriel Williams most lenders won't allow you to refi to the point where the property doesn't cash flow. If you're in a strong rental market and don't foresee a decrease in rents then pull that cash out and do it again! If it's a slightly riskier rental market I'd think twice about pulling out the max $$$ on the refi or just be prepared to have a property decrease it's NOI in the future.