Cash out refi to buy first investment?

[Tanner Woolley]

My wife and I are about to do a cash out refinance on our primary residence and get around 80-85k in cash to put towards a short term rental investment property. It will increase our personal residence mortgage payments by about 350-400/month, so that means we need to at least clear that on top of our vacation rental STR mortgage. For anyone in the STR market/game, if we have a property is it pretty typical to be able to clear more than 400/month on your STR after all expenses? We're looking in TX and thinking San Antonio. We're probably only going to use 40-50 of the 80k right away and use the rest to hopefully get a second property a year or so later.

[Jim Kittridge]

Hi Tanner,

Assuming you have deal flow, doing a cash out refi can make a lot of sense as you're getting incredibly low rates on a 30 year fixed. It will lower your blended interest rate for your STR investment.

If you're borrowing at fixed 3-4% interest and buying a 7-10% CAP deal, that leaves a lot of room for cashflow. If an STR only produces $300-400/mo in cashflow, I would run.