Where to get objective advice? Leveraging existing to buy more rental(s).

[Edwin Ro]

Is this a good time to tap into a rental property's equity to buy another one to generate cash flow? The rental has no debt.

[Evan Polaski]

@Edwin Ro, yes and no.  Are you seeing deals that you can buy that will earn more than the loan will cost?

I.e. You take out a $200,000 mortgage at 5.5% for 30 yrs.  That is a monthly payment of $1150.  

So the next rental you buy with that $200,000 will have to generate gross rents probably north of $1800/mo in rent to truly cover that $1150 long term. Taking into account some reasonable capex reserves, vacancy, insurance and taxes, repairs, etc.

If you loan has no prepayment penalty, you could refi to help cash flow later on if rates drop, and even if you only break even, you are benefiting from appreciation on two assets, which could be worth it.

But, if you can't buy a property that more than covers your mortgage, you are in a worse cash flow position to buy a second property.