Cas Out Refi for first time investment property

[David McCarthy]

We are looking to buy our first rental property but need more cash to do so. The value in our area has gone up pretty dramatically. We bought for $268k 4 years ago and owe about $225k on it. Similar houses are selling for $400 plus our realtor would list for $450k expecting to get about $420k if we sold.

Rather than pulling out of retirement funds or selling our current house, we explored the cash out refi option. Would give us about $80,000 cash allowing us to pay down some debt so our monthly expenses actually decrease and free up money for a downpayment on an investment property which we're approved for. The refi loan would be for $320k and eliminates the PMI we currently pay which is why our monthly expenses would actually decrease along with paying off some debt.

What are the drawbacks? Other than the market crashing and the house losing value...has anyone done this or something similar before?

Thanks!