Cash-out to reinvest?

[Christian Orellana]

Hey Everyone,

I am pretty new to investing and would love to pick your brains. I currently have a 16unit that's paid off, and family operated with good cashflow. My question is, should I pull out some equity and use it as a down payment in another property? or do investors pull cash out and pay if off completely? I was thinking of pulling out between 200-300k. Looking to purchase another multifamily between $1-1.5MM.  Thanks in advance!

[Greg Scott]

Of course your property has good cash flow, but your Return on Equity is almost certainly terrible.  Moreover, a paid-in-full property is always a nice target for an ambulance-chasing lawyer.

By doing a cash-out refi and buying another property, you should be able to increase your combined cash flow, get your Equity working harder for you, and make your property less attractive for a lawsuit.

I would go this route.