A danger of rapidly increasing home vaules...the cashout refi

52 Replies

@Mike Terry for sure there is lots of exuberance in the market. Look at the dow jones, bitcoin etc. At some point this will be end and lots of people will be hurt. Those people who refinanced the house to buy consumer items may lose the house. If they do though they can always rent one of my houses.

For the record, cash out becomes overhead as financing costs. Too much overhead will take down any business when faced with a downturn. Every person I knew who crashed and burned from about 2008 to 2010 did it on the BRRR method. It became a crash and burn machine in a market downturn and turned legit millionaires I knew into multimillion dollar debtors. The smart ones took their cashouts and put them in bankruptcy protected places like their 401k. I and one other guy I knew were the only ones who didn't have to declare bankruptcy because we didn't cash out and ran lean operations. So heads up, if you're going to do this - be prepared for someone to be left holding the bag. I'm not saying it's wrong for the bank to be left holding the bag when frankly they engineer these problems; I am saying prep for it.

Originally posted by @Tim W. :

For the record, cash out becomes overhead as financing costs. Too much overhead will take down any business when faced with a downturn. Every person I knew who crashed and burned from about 2008 to 2010 did it on the BRRR method. It became a crash and burn machine in a market downturn and turned legit millionaires I knew into multimillion dollar debtors. The smart ones took their cashouts and put them in bankruptcy protected places like their 401k. I and one other guy I knew were the only ones who didn't have to declare bankruptcy because we didn't cash out and ran lean operations. So heads up, if you're going to do this - be prepared for someone to be left holding the bag. I'm not saying it's wrong for the bank to be left holding the bag when frankly they engineer these problems; I am saying prep for it.

Wise words my friend!  You and I think a like.