Cash out refinance will turn cash flow negative?

[Douglas Goldstein]

I'm looking for ways to finance my next purchase. I'm could do a cash-out refinance on a rental I own since the LTV is 57%. Currently, it has $150/month cash flow. If I refinanced to an 80% LTV, I could get $180,000 to spend, but at that maximum level the cash flow would plummet to an $850/month loss. I wouldn't do THAT much, but how low would you let your cash flow go in order to unlock home equity for a new purchase?

[Joe Villeneuve]

Originally posted by @Account Closed:

@Joe Villeneuve What Michael said.

 You're rationalizing a bad deal by saying you can afford to make a bad deal.  Here's what's really happening.  You have a good deal (the 2nd property), that is being robbed by the bad deal (the 1st property).

Look at it this way.  Your money is working two jobs.  One job you are getting paid to work.  The other one, you are paying your boss for the privilege to work...and you're OK with that because you're working two jobs, and the 2nd one is the one paying your boss.  If your money started with the second job, and you added the first one to it, that would mean your money would be working twice as hard for less money. 

If the value of the 1st deal is the equity, and you want to access it (I would too), you have 2 choices:

1 - REFI it, and make the 1st deal a bad one now, or...

2 - Sell it, and replace it with another good deal like the 2nd one.  Either way, you would have two properties...but in the 2nd option both deals making money for you.

Don't get emotionally attached to your properties...or specific money in any property.