Question about Rental Propety

[Randy Garcia]

I own a rental property that is bringing me $1250/month in rental income. I do not have a mortgage on the property as I paid for it in cash. Should I keep it as it is or pull the cash out to get another property? 

[Greg Scott]

@Randy Garcia

Try this:

• Calculate your total return on your current property.   
• Assume you did a 50% cash-out refi and you bought an identical property with 50% loan
• Calculate what your return would be with these two properties.   
• I'll bet your returns improved, right?

A 50% LTV is a very low risk loan. But, now you have two properties and two tenants so your risk of a vacancy is much lower. In total, your returns went up and your risk (variability of returns) goes down. Who wouldn't want that?