Thinking about cash out refi for first investment

[Mike Birney]

Hello,

Long time lurker first time poster! I am thinking about doing a cash out refi on my current home in order to invest in my first investment property. I am estimating that I have about $100k in equity in my current home. Is it a bad time to do a cash out refi with rates being so high? Any advice would be super helpful.

[Nathan Gesner]

Quote from @Mike Birney:

Hello,

Long time lurker first time poster! I am thinking about doing a cash out refi on my current home in order to invest in my first investment property. I am estimating that I have about $100k in equity in my current home. Is it a bad time to do a cash out refi with rates being so high? Any advice would be super helpful.

Rates are high. I don't think it's a "great" time to buy when rates are high, prices are high, and inventory is scarce, but there are still opportunities out there.

I'm also concerned by the number of people cashing out equity in their primary home to fund their first investment. Property prices are dropping around the country. If you cash out $75,000 of your equity and then the value of your property drops 10% or more, you may end up under water. And you're using that equity to purchase another property that may be over-priced and that may lose value as the market drops. It could domino into a bad situation.

An experienced investor knows a good deal, knows how to manage rentals, and has reserves/cashflow to weather a storm. New investors do not. I would be very careful about leveraging your primary home in a peak market to dive into an investment vehicle you have no experience with.