should I refi or sell to buy more houses?

Question

I have an opportunity to buy more college investment rentals, We currently own 4 and have about a 50% Loan to Equity ratio in 2 that we bought 4 years ago (if you believe Zillow). Prices seem quite high, which means we would get a lot for our current houses, but have to pay a lot for new ones too. The cash from selling 2 houses could get us up to 4 more houses.

Would it be better to cash out refi or sell the 2 with a high LTE? What would be your decision points?

Adam Tafel · Answer

I'm currently in a similar situation : refi or sell? I'm talking to my lender to get specifics, and then I'll compare the return on my equity in each situation. Would a cashout refi still allow a healthy amount of cashflow? Chances are your return on cash will be greater with the refi, also consider you're paying down more mortgages and gaining more appreciation (probably) with more properties, adding more to total net worth.

Rich Waldis · Answer

All great points! Thanks for the feedback!

We are leaning towards sale since we will get 100% cash out rather than something less than that.

Also agree that more properties (selling 2 to get 4) is better in the long-run. We couldn't get as much cash from the refi so the extra property may be worth it.

Have to look closely at total cost - closings, commissions, etc.