Where to Invest Cash from Refi???

Question

Hi there!

I am new to the BP forum and this is my first ever post. That said, I've been listening to the podcast daily for about 6 months :)

My wife and I bought a home in San Diego about six months ago. The market here is absolutely nuts, and we recently had an appraiser tell us it has gone up about $100K in value. Not bad from an ROI, perspective, but don't think that's very scalable. Lol.

We are considering a cash out refi and reinvesting ~$100K, but we are new to BP and don't know where/how to invest it in a semi-safe way! Our mortgage would increase by ~$500/mo, and it seems like most properties we could afford would BARELY beat that from a cash flows perspective. Factoring in maintenance and property management, it seems like single family investment properties is probably not the way to go.

Please help! I am super eager to learn more about this lovely world. I bought like 6 BP books off Amazon last week and have been avidly going through them all. Absolutely open to investing in markets outside of San Diego and non-single family methods.

Thanks in advance!!!

Maxwell Ventura · Answer

@Will R.

$100K in 6 months is pretty amazing. The market out here has skyrocketed since May/June of last year. Lots of reasons why and lots of reasons why it should continue in that direction.

Ask yourself what's more important to you; Short term higher cash flow/cap rate property? Or long term play that will grow exponentially via compound interest? SD was voted most competitive market last year and also voted the #1 market to expect appreciation in 2021 at 8.3% (Core Logic).

With that being said, if you guys are trying to accumulate assets faster and don't have a large sum for a down payment on an actual "investment property" then maybe SD isn't the way to go. All depends. There are many good STR investment plays in SoCal too. Joshua Tree, Palm Springs, Idlewild, Big Bear, etc..

If you want best return on your money you'll want to look at an owner occupied low money down play in a heavy appreciating market (SD #1 right now)

Hope that helps

Connor Nellans · Answer

@Will R. congrats on the great appreciation! You are sitting on a great opportunity to keep building from here! I think the first question is what is your goal with RE investing? Do you want to quit your job ASAP? Do you want to invest full time? Is cash flow or appreciation your goal? Your goal will help determine where and what type of investing you do. I am from San Diego as well with properties here as well as back home in Minnesota with a balanced strategy of appreciation and cashflow. I like connecting with local people in real estate so never hesitate to reach out if you ever have any questions!

Drew Sygit · Answer

If you're looking for a cash flowing rental, check out Metro Detroit. We write about the area on our BiggerPockets blog.

Twana Rasoul · Answer

@Will R. Welcome! If you made $100k in 6 months....why invest elsewhere?  Sounds like you guys had a hell of a start to your real estate journey, Congrats!  I recently did Cash Out Refi's myself and will be personally buying more here in San Diego.  Depending on your loan to value...you may not be able to pull out any of the $100k.  Lenders will usually loan you around the 75% LTV range.

Where to Invest Cash from Refi???

Most Popular Reply