Refinancing vs taking a loan to purchase prenatal property

[Austin Brushett]

I am on the fence about doing a cash out refi on my primary home to purchase a rental out right or taking out a loan on a rental property so it is not tied to my primary house. I know there are a ton of variables here but just wanted to pose the question to get some opinions on what others have done. I am just getting into aquiring additional properties to build a portfolio and was curious about what others have done starting out. Not sure what the rates will look like here in the next few months either way but none the less my plan is to buy in the somewhat near future. 

[Kyle J.]

Honestly I only clicked on this post because of your catchy title (I wanted to see what a “prenatal property” was). But since I’m here I’ll try to provide some insight.

I have done a cash out refi on a fully paid off rental to buy another rental. And I’ve also just bought rentals using traditional mortgages on the property I was buying. 

But I’d caution you on over-leveraging your primary residence to buy more rentals. Obviously it’s possible to do it. However, in the event things were to go bad (like they are now for some people whose tenants aren’t paying and they’re finding out they don’t have enough in reserves), you don’t want to put the home your family actually lives in at risk. 

Just something to think about.