Cash out refinance to invest in Multifamily

[Vijay G.]

I am a newbie and I paid off 80% of my  rental mortgage. I have already applied for cash out refi planning to use for 25% downpayment  and I need to finalize my decision next week. Is it wise to take cash out refi and invest in my second multiplex given the market conditions?  OR wait till market cools off or crashes and then take out cash out refi.. please advise

[Randall Alan]

I think it depends on what deal you can find.  Listen to the numbers.  If your market is giving you properties you can buy and make a good profit, it only makes sense to buy them.  Even if the market moves lower, your rental income will not, so you really aren't in a position to "lose" as long as you buy a property that is a good deal and will turn a descent profit as a rental.  If all you can find is retail deals that are at the top of the market prices, the numbers would probably tell you they aren't a good deal to buy in the first place.  

For us it is a waiting game.  We are always looking, but buying far fewer than we have in the past.  What we HAVE been doing is selling our least favorite units - again - listening to what the numbers are telling us.  Right now a lot of our properties are telling us, "If you sell me, you will get 10 years worth of rental income as profit on the sale and not have to deal with any more repairs, or tenants on that property!"  It's a pretty good motivation to sell some of our least favorites!  We are full time in real estate.. so we rely on our rentals for all our income.  We can't sell them all... but we have taken some profits by selling a few in the past year.  We have used the proceeds to pay down other mortgages... going from 19 loans to 9 through cash out refis, a few sales, and doing a consolidation loan!  This sets us up well to be able to buy more properties through Fannie Mae residential financing when they do eventually show up.

All the best!

Randy