What's the next best step?

[Nathan Adams]

I am a pretty new real estate Investor in Columbus Ohio. My first investment is multi-family 8 unit that pulls in $3400 per month. After expenses it cash flows $1400 per month. I bought the property for $200,000 and currently owe $160,000. I'm ready to take the next step in investing but just looking for a little advice. One option I've thought of is to do a cash out refi. This would get me around $80k to work with for downpayment and remodel as required for one and maybe 2 properties but I'm not sure that this is the best option? Both my income and my spouse's are likely considered not sufficient to the bank (even though this is not the case), and I'm worried that I will not be able to secure both the refi and a new loan. Any suggestions?

[Robert Ellis]

Originally posted by @Curt Neider:

It sounds like you have a first world problem on your hands! 

First, if you work with a long term rental finance lender, rather than your bank, they won't even care what your income looks like. Either for the cash-out refi or for the next purchase/flip. They are going to focus on deal metrics.

However, regardless who your lender is, you will likely take a hit on your interest rate when doing a cash out refinance so you should compare how much rent you are giving up to interest compared to the value you are getting from the next project. As a lender, I would say get that refi done! But as a conservative investor, is it worth considering how long it would take you to come up with a down payment through cash flow alone? Maybe if you wait a year and save your profits you can keep all of the existing cash flow and still add the second property? Fix/flip products are getting pretty competitive so the amount you would need to put down is lower than in the past. 

Kudos on that project though. I would buy that project any day of the week!

 Excellent advice!  A refi is probably going to be your best bet like Curt said.