Cash-out refi on investment condo?

Question

Hi everyone: Rookie here in Los Angeles. I have owned a rental condo out of state for years and do not own the rental in L.A. where I live with my family (husband and two littles). Inspired by BP and y’all, I’m thinking of doing a cash-out refinance on the condo for a down payment on a primary residence in Los Angeles and possibly another investment property elsewhere.
Would love any and all advice about cash-out refinances on investment properties. Are there big pitfalls I should be aware?

Am I being too ambitious to think about buying two MORE properties after owning only one rental for years? Thanks!

Lauren Whaley · Answer

Thank you so much, @Alex Uman. Run the numbers, decide, take action. Appreciate your response! And, thanks, too, @Jessica Tsao! Grateful for your thoughts and list. Will report back on what I end up doing. :)

Jessica Tsao · Answer

@Lauren Whaley

A shout out from CA too.  My opinion is that it's a math question, I would take the numbers and do the following:

#1 Your condo: @what loan amount = cash flow where you are comfortable.

#2 Make sure you have 6-9 reserves for the Condo

#3 With the loan money, you can explore options with purchasing your primary residence, how much would that help your monthly mortgage instead of renting. ( don't forget about the tax benefits of homeownership in tax write offs of property taxes and interest)

I am not sure how much equity you have, but if you still have cash left over, I would consider re-investing in another property.  I heard a new term recently, "Equity Coma" Equity is great, but you just look at it.  Recapitalizing through leverage is why real estate is so profitable.  "Just don't over leverage"

I hope this helps.

Alex Uman · Answer

It all depends on what your goals are and how risk averse you are. Are you confident the rent you are getting will cover the mortgage on the condo? Take a look at the different options lenders will provide and figure out which you are most confident in doing. Good luck in all your investing!