Cash out refi Decision points

[Travis C.]

Hello,

I read these forums from time to time and have found them to be very helpful. I wanted to pose the following scenario to see if anyone has any thoughts, as I am always interested in hearing multiple angles. My wife and I just finished paying off the mortgages on our 4 rental properties in San Antonio. Total equity is roughly $500k-$550k. We are ready for the next step in our investment path, but this is where I am stuck. I do consider my decision point to be a good problem to have, but just looking to bounce some things around.

Option #1: take out a 75% LTV cash out refi and take the money and buy 4 rental properties each. Then take the 4 new properties and do 4 more cash outs and keep repeating this until there is not enough money to buy any more while properties with borrowed cash from cash out refis.

Option#2: take out a 75% LTV cash out refi and take the money and buy as many properties as possible with 25% down. Would be about 10 properties with $40k down on $160k properties. I have a lender who will do as many loans as I need at 75% LTV. Each one would cash flow $350 month.

Essentially, there is little variance between monthly cash flow for option #1 and Option #2, but would it just be more advantageous to do option #2 due to leverage considerations because there would be more properties involved? I'm not doing any major rehabs. I can handle some rehab, but mostly only minor cosmetic versus some major overhaul although I only mention that as an aside, as it is not really important for my decision I don't think.

Please let me know what you think. If you want to throw out other options, then this is what I am here for, too. 

Many thanks!!!!

[Upen Patel]

@Travis C. You can do option #1 and get your cash out without any seasoning using Delayed Financing. It would be nuts to pay the private money rate. If you buy with cash (which you can), then within the first 6-months you can do a Delayed Financing which will allow you to take out the lower of the purchase price or the allowable purchase LTV (which depends on the type of property). You get a 30 yr fixed confirming loan. If you and your wife work, then you can each get up to 10 conventional loans (1-4 units), including your primary residence.