Cash Out Refi or Sell?

Question

First time poster here! I am currently living in a "live in flip" so to speak. I bought my house back in August of 2019 hoping to use the GI Bill while I was in college to get into real estate investing. Fast forward to today and I am wanting to move into another live in flip. My initial thought is the best case scenario would be to cash out refinance my current home (i'm estimating $30,000 in equity) and buy another house to do a live in flip so I can rent my current house and use the cash to put towards another house. My question is, would I be able to qualify for another mortgage after refinancing my current house? Selling is not out of the question due to the neighborhood being a C at best. My fiance and I own another rent house in a C+ to B- neighborhood as well that we definitely want to keep. The current live in flip is a 2/1 and the one I would like to buy is a 3/2. Long term I believe the 3/2 will perform better due to its size and being in a better neighborhood. Any input is much appreciated!

Ian Plocky · Answer

@Blake Morton, my vote is always to keep.

In the longrun, you will never regret keeping Real Estate. In addition, your 30k cash-out is not taxable - but your sale profits are (even if tax-deferred through 1031).

I agree with @Timothy Boyd that your DTI shouldn't be too high. You can even play with some numbers on DTI calculators and ballpark estimate where you will be after your Refi.

Cheers!

Timothy Boyd · Answer

Hey @Blake Morton!  Not an expert here, but my vote would be to keep the 2/1 and cash out refinance.  This way you still control the asset for the long term, and you can take advantage of the current low interest rates.  I don't think you'll have a problem getting another mortgage as long as the refi does not put your DTI ratio too high.  Definitely something to talk through with your lender or with people smarter than I am on BP, but that's my two cents.  Best of luck to you and thank you for your service to this country!