Cashout refinance for additional purchase

[Sattir Bitti]

Hi BP community,

We have a duplex that is well appreciated with only 20% LTV. We are thinking of doing a cash-out refinance to bring the LTV back to 75% and use the cash for purchasing 1 or 2 additional Duplexes, thus we can distribute the 80% equity across 3 properties instead of tying them up into just 1.

Is this a good strategy? 

-Sattir

[Charles Carillo]

@Sattir Bitti

This is a very popular real estate investing strategy. Yes, you will distribute your capital/equity across 3 properties however, these properties will be at a higher LTV, and that technically makes it riskier. With that being said, you already have one duplex that seems to be running smoothly, and your next 2 will probably run similarly. The problem I normally see is with new investors who try to over-leverage out of the gate, without any proof of concept.