Refinancing primary residence, considering cash out to invest

[Hardeep S.]

Hello,

I'm currently refinancing my primary residence, I can either do a rate/term refi and get 3% interest rate, or get roughly $90k cash out and get 3.5% interest rate.

I'm considering getting the cash out to launch my real estate investing career. My goal is to quit my job eventually. I've read the biggerpockets book on small multi family investing, however, I'm reading that it's really hard to cash flow these days. I'm willing to invest anywhere in the country, I live in the bay area. Any thoughts on this? I don't have a specific property or market in mind, but I've looked at markets like Stockton and Fresno. Ideally, for my first investment, I would want to be within a 3-4 hour drive, but I'm willing to invest out of state as well if that's what it takes for cash flow.

Is it worth taking out that $90k? I'm okay with the 3.5% interest rate. If I can't find a good property, I would consider using the $90k to pay off my wife's student loans, and we'll start saving money monthly immediately. 

Thanks!

[Will Fraser]

In my opinion it would certainly be advantageous to take the $90k at a 3.5% interest rate. There are multiple ways to return higher than 3.5% ROI and whatever the premium rate of return you make from the $90k is, that's your keep. That's the same strategies banks use and it's amazing to be able to use that strategy to profit like they have proven useful.

Whether or not you can deploy it into a property is a secondary question in my mind. 1st, get the cash and deploy in something liquid with an above 3.5% ROI, then work to identify your ideal property market.