Should I refinance w/ cash-out or use my taxable account?

[Dan Marl]

Should I refinance w/ cash-out or use my taxable account to buy homes?

Hello everyone!

I am thinking of investing in real estate. Maybe in 5-10 years have enough rentals where I can quit my job and do real estate investment full time.

Situation:

- My home is worth 688k

- I still owe 227k on the mortgage

- I have 470k in my taxable account (mostly index funds) - they are doing good this year

Options

1.Sell funds in my taxable account to use as down payments for future investment homes. I will have to pay long-term capital gains tax 

2. Refinance my home with cash-out with 30 yrs fixed at 2.6% interest rate. I can borrow up to 510k to use for down payments. 

If I borrow 510k, the mortgage will increase from 900/month to 2000/month but I can handle that.

I am ready to buy 3-5 houses in the next 12 months. Maybe do BRRRR (Buy, Rehab, Rent, Refinance, Repeat)

What would you guys do?

[Jacob Curtis]

@Dan Marl sounds like option one comes with some significant penalties when option two does not. If you use BRRRR with option 2, depending on the gap between the purchase price and ARV, you can always recoup the equity cashed out and pay off the increase principal with enough to keep investing. I'd just keep investing the entire amount to help scale faster, the increase in payment will be covered by cash flow fairly quickly. There is also the HELOC option as a third, which differs slightly from the cash out, just need to identify what is the better option for you.