Investor · New Cumberland, PA · Member since 2016 · 10 posts · 0 votes
I purchased my first rental property 2 years ago. In the beginning it was an owner occupied home as I lived in the first unit and rented the second. Per the terms of the FHA loan I lived at the property for 1 year. After that 1 year I moved into a house that my girlfriend owns. I now rent both of my units. The property has a pretty nice cash flow.
I am interested in buying more properties and continuing in real estate. I used the FHA option because it only required 3.5% down. Since that option would no longer be available I am assuming that I would need to save for a 20% down payment. I don't have amount of cash on hand at this point. What are my other options? Am I moving to quickly, should I just be patient until I can afford the 20% down.
Research and consider the option of a cash out refinance of your rental property. Depending on the bank/lender of choice you may be able to get 70-75% of your cash back out of your rental to invest elsewhere and still pay low interest rates in today's market.
With cash-out refinancing, you refinance your mortgage for more than you currently owe, then pocket the difference. You essentially trade equity for cash that most be repaid over the course of your new loan.
Here's an example I found on Bankrate.com:
"Let's say you still owe $80,000 on a $150,000 house, and you want a lower interest rate. You also want $20,000 cash, maybe to spend on your child's first semester at Princeton. You can refinance the mortgage for $100,000. Ideally, you get a better rate on the $80,000 that you owe on the house and you get a check for $20,000 to spend as you wish."
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Do some more studying, talk to more people, and consider your options.
@Christian Harris Thanks for the suggestion. I didn't mention it in my first post but I no longer live in the rental unit. I have since moved into a house that my girlfriend owns. I do believe that you need to still be living in the home in order for a cash out refi to be possible.