Should I refinance my home to buy a rental property?

[Rebecca Beck]

Hello Everyone, 

I was wondering if it was foolish to refinance my personal home to purchase a rental property?  

I'm seeing that it is a trend but I imagine the risk and/or inevitable lawsuit would make me lose everything.  Just seems like there a lot of economical issues and warnings against taking a loan against my home. 

Want to pick some brains and make sure I am not making stupid long-term financial mistakes. Thanks all for your feedback!

[Jennifer Beadles]

Great question @Rebecca Beck! I've actually taken lines of credits out on many of my properties to acquire more instead of doing cash out refinances. I like the line of credit option because most of my mortgages have super low rates and rates have been going up. 

The line of credit or cash out refinance allows you to take advantage of what I call stagnant equity that's not really doing anything for you. Kind of like keeping a ton of money in the bank making nothing. If you can get a 10-15% return on this equity then I think it makes sense.

You'll just want to run the numbers and see if you're comfortable having a higher mortgage payment or paying off that line of credit. I set a criteria that any new property I buy must still cash flow after making it's mortgage payment, and the payment on the line of credit. 

Hope this helps!