Should I be pulling out equity?

[Elisabeth Warren]

With my paid for condos and almost paid for single family rent dwelling I have about $350k in equity. In my primary dwelling I have about $500k equity. I am planning on pulling out $300 soon with primary dwelling refi. Should I be considering pulling as much cash equity out as I can during this period of low interest rates....and just holding it in interest baring IRA until real estate prices become more reasonable? I feel like I'm not taking full advantage of possibilities......any advice?

[Tony Kim]

Originally posted by @David M.:

@Elisabeth Warren

Its a little tough... First, not sure how you'd get all that into a retirement account like a IRA...

If you could get a hloc that would be better since you would have the flexibility, albeit slightly higher rate.

But, with rates so low, its not a bad option really.  Paying interest on your equity is really like your opportunity cost.  Depending on what happens with SALT taxes and your tax situation, you might be able to deduct the interest, or some of it.

But, if you were able to conservatively invest it in the stock market and cover your interest (tax costs aside or included), that would make it worth.

Again, its really what your "crystal ball" says will happen in the future, and are you okay with when your "crystal ball" is incorrect.

Sorry, I don't have a straight answer, but I hope this helps.  Good luck.

Well, a HELOC would negate one of things the op is trying to do which is to lock in cheap financing. And since HELOCs are generally floating rate, the cost to borrow would go up as interest rates rise.

Also, the SALT limitation has nothing to do with deducting interest expense. The only way the interest on this additional financing will be deductible is if it's used to on the primary home for repairs or remodels. Then it would fall under an itemized deductions. If the financing is used to acquire a rental, then the interest can be offset against the rental income. Investing it in the stock market would make it 100% not tax deductible.

To the OP, the GFC is still fresh on our minds, but the chances for this kind of pullback to happen again is not very likely. Even if we enter a buyers market, RE generally moves like a barge...it will take years for there to be a meaningful reduction in prices. Are you willing to bear the carrying costs of 300k during that time?