Cash out refinance question

[Greg Golden]

Hi everyone, I am new to real estate investing but have over 30 years experience in the investment management industry.

My question centers on the merits of doing a cash out refinance on a rental property that I originally paid cash for. The purpose in refinancing would be to bump up my cash on cash return. Is there a seasoning of ownership and rental history that needs to happen before doing this?

I have enough liquidity to pay cash for rental properties but wanted to poll the group here to get your feedback on your experiences and any other angles I might be overlooking.

My cash on cash returns so far on cash purchases is in the 8-10% range but I would like to have a few properties in the portfolio that generate much higher returns.

Thanks in advance for your input. I am new to Bigger Pockets but am enjoying the forum and will be upgrading my membership soon!

[John Morgan]

@Greg Golden

I just did this last week and it worked out great. Paid cash for my first property I bought for 130k four years ago. Did a cash out refi on it. They gave me an investment loan for 146k loan (property appraised at 195k) for a 15 year at 4.125%. Three days after I got the cash from this loan, I closed and paid cash for a new property. I plan on remodeling this new property and getting it appraised soon. Then do another cash out refi on this property. And repeat the process. My rent on the new house will pay for my loan and gives me a little positive cash flow. So I basically gain a new house by just moving money around. And I can write off the mortgage interest which is nice. I’ll probably do a few more. Let me know if you want a loan terms quote from the lender I use. They work with investors and were great to work with. They will give you back 75% of the appraised value for a loan.