equity or not to equity

[Lawrence Cox III]

Hello everyone, I already own one investment property. I want to expand. What is best, to take out the equity of this property and buy something that is at the equal or less than the equity amount. This way it would be 100% paid in full so that I can now borrow against this property equity. Or should I just seek financing for a new property? What are the benefits of either?

[Joe Villeneuve]

@Lawrence Cox III Look at the difference in terms.  More important, is the power of the different cash scenarios.  Here's what I mean:

If you go with a new mortgage, you are basing the loan on a % of the purchase price, and you need to come up with cash for the rest.  Example:  $75k property.  80% loan.  You need $15k in cash, NEW cash, to buy using new financing.

If you refinance, and use the equity from the current property, you are an all cash buyer to the new deal...but none of it i new cash, to you at least. You're just converting your equity to cash. Example: Same $75k property. Existing property is worth $100k. You refi at 75% ARV. You get $75k in cash, and buy the new property without needing any new cash.

Continue to do this with the next property, and the next, and so on.