Cash out to Reinvest?

5 Replies

I bought a home in Durham, NC in 2006 for 130K. It is 2018 and the house is currently appraising for 190K and I owe 80K with 18 years left at 4.5% interest. The property has been great, same tenant for 12 + years and cash flowing about $300/ month. My goal when I bought the house was to be a buy and hold investor, with the goal to pay off the mortgage. But, I see an opportunity. I was thinking of refinancing and cashing as much money out and going back to 30 years. I would use that money to buy more properties and have more cash flow. I’m leaning towards cashing money out and reinvesting, any thoughts or suggestions? Alex Sabio

You will lose most if not all of your current cash flow if you cash out refinance.  If you just straight refinance you will likely increase cash flow a bit but not have the money to go after another property.

Did you house hack this or buy it as an investment? I'm not sure you will get to refi an investment property on a 30 year mortgage now and interest rates will probably be a little higher for you now.

I would cash-out refi or even sell and do a 1031 exchange so that I could buy a couple properties and start the depreciation cycle fresh with those.

@Aaron K. yes I would lose that $300/ month cash flow. If I cashed out and went to 75% LTV I my payment would go up about $150, but I can take about $45 and use it to buy another property. I’ve been buying properties in OH at a lower price point cash. I bought one for 72K and it’s bringing in $975 in rents.
@Kevin Sobilo I bought it brand new as an investment property. I’m not looking to sell, maybe just too emotionally attached to the house. One of my first investments out of state (I live in So Cal) and it has been really good to me. I bought it with almost zero out of pocket. If I was smarter I would have bought 10 more at the time.

Have you considered doing a HELOC? Investment HELOCs are hard to get, but it gives you a lot of options. Just be cognizant of the fact that the interest rate is variable. You'll prolly want to refi out and pay the credit line after a relatively short period. I'm actually going to cal PenFed next month to get one on an investment property I've owned since 2009. Happy Hunting!