Funding next deal... Refinance

[Emily Allen]

Hi, This is my first post! I need help!  I started to get into real estate when I leased out my house that I originally purchased as a primary residence. When I originally leased it out, I wasn't thinking of it as an investment, but the light bulb clicked a year later and now I'm ready to become financially free and invest more! It probably wouldn't be my first choice as a pure investment, but now that I have it, I'm trying to come up with a way to invest in my next property without having to dip too far into my cash reserves.  My property has increased in market value since my purchase, so I'd like to take the equity out of the house to reinvest in my next property, but I want to make sure it makes sense...given that I'd be paying the same interest rate, or maybe even a little bit higher interest rate.

• Original Purchase value: $225,000 Original investment: $30,000
• Current Market Value: Around $260-265k
• Current Mortgage: $184,000, 3.875%, 26-years remaining, P&I = $928
• Current Cash Flow on rental: $500/month

My question is, should I refinance to roll 20-25k in equity out? Or are there any other creative ideas?

The new loan would be on about:

•  $208,000 (increasing debt from 184k)
• Interest rate would stay the same at 3.875 or it may even increase to 4%, so the new P&I would be about 977.5 - 993.02 (up from 928).
• New cash flow on the property would be $435-$450 (decrease of $50-$65/month).

Does this strategy make sense to other BP friends?