House Hack Refinance - Cash-out or rate/term BRRRR

[Shane Tagg]

I'm looking for guidance on the following options - 1) cash-out refinance my house hack duplex so I can buy another soon, or 2) just do a rate and term refinance, then keep saving and wait to buy another. I'm leaning towards option 2, but I'd like help on key factors to determine this decision.

Current status: I'm living in a duplex I bought for 210k, with 20k down. Current balance is around 188k, P&I is 1560/month at 9.25% interest on a land contract. Taxes & Ins is 600/mo. Rents are 1600(2bd/1ba) and 1100(1bd/1ba), but I'm living on the side that would rent for 1100. I renovated the property, and I estimate it is now worth 285k (~97k equity).

Option 1: Only do a rate and term refinance (roughly 6.75% for 30yr), then buy another property spring 2027 when I have enough saved (I can put away about 1500/mo in savings). P&I on the leftover 188k would be about $1200/mo.

Option 2: Do a 80% LTV cash-out refi right now for 1 year at 9.5% interest on the ~228K. P&I was quoted at $1917 per month. One year after that, I can do a rate and term refinance only, to lock in a lower rate (~6.5% next year). Assuming the balance stays about the same, P&I will be $1441 per month. With the cash-out money, use as a down payment to buy another house hack ASAP, then buy another, about a year after that. Is it worth double the closing costs and year of interest?

**Thank you!!**

[Corby Goade]

You're missing the best option- which would be your Option #1 PLUS a heloc so you can go find another deal tomorrow. 

Nice work!