Cash Out Refi or DSCR Loan?

Question

I have sold off most of my properties but still have one long term rental that is paid off and brings in 2550/mo.  I am wanting to build back up but there is a lack of multifamily units in my area so it will likey be SFH. Would you Refi the existing property to use that cash to buy more or find a DSCR loan.  I do have Enough for a 20-40% DP on 2 properties currently.  Been investing in other long term business ventures as well outside of real estate.

Zachary Deal · Answer

Hey Kody, one option could be doing a lower LTV (60% -65%) cash out refi on the current property and then put 25% - 30% down payment on the other properties. You're going to get better pricing that way and cash flow will be stronger as well

Kody Louchart · Answer

Thats absolutely on the table. I hate that with no mortgage i also have no write offs essentially on my current property and am not expanding my portfolio much right now.  i figure leveraging some of that equity (450k or so in total equity in that property) as well as financing the other deals with a good down payment will alow me to scale and have the tax breaks at the same time.  WIth the slow market in our area its a great time to get some deals on properties.

Erik Estrada · Answer

Happy to connect

Frankie Vozzi · Answer

Hi Kody, great question. Both cash-out refis and DSCR loans could work depending on how aggressive you want to scale. Since your current property is free and clear, a cash-out refi could give you maximum leverage to expand quickly. On the other hand, DSCR loans are a great way to acquire without tying up all your liquidity, especially if you want to keep strong reserves. I work with investors in both scenarios, so happy to share some numbers on what each path could look like based on your rental income and goals I sent you a DM.

Diego Alvarado · Answer

Hi @Kody Louchart

There are DSCR loans that allows you to cash out, so I don't think those would be different approach. DSCR loan with good credit score are sometimes better rates than a conventional investment loan.

Zach Wain · Answer

I think it depends on your goals and how fast you want to add.  If you have the cash for 1-2 properties now, you can keep the cash out refi in your back pocket for when you want to add more.  Or, if you want to stay liquid and/or invest in the stock market you can access cash now from the F/C home and get rocking.

Alexis Sostre · Answer

Have you thought of a Hybrid Approach by refinancing partially not max cash-out to free some capital, then supplement with DSCR loans plus your cash to acquire properties.

Zachary Deal · Answer

If you're able to keep leverage low on the refi and multiple purchases it will certainly help your rate, cash flow, etc. Also, as you mentioned it is a buyers market in a lot of places right now so it's a great time to quickly expand your portfolio

Alexis Sostre · Answer

Absolutely! There’s strong potential here to scale your portfolio while leveraging valuable tax benefits that can enable you to pursue more deals in the future.

Cash Out Refi or DSCR Loan?

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