Cash out Refi or wait

[David Naphy]

Hi BP community, I appreciate any and all suggestions!

Last year, I purchased a SFH under market at 7.65% interest rate and did some rehab to up the value. As of today, the house rents for $3,400 per month and my PITI is $2,500 per month. There is another house about two blocks over that I have the opportunity to buy off market under market value. In order to do so, I would need to do a cash out refinance of the first property, and was told I can pull out $80,000. If I do this, my PITI would jump up to $3,090, really cutting into any cash flow and the interest rate would jump to 8%. The house that I have the opportunity to purchase, would rent for $3,250 and the PITI would be $2,600. My question is, do I just not touch the first property, use the cash flow to reinvest and pay down the mortgage or save up for a downpayment down the road OR do I pull cash out of the first property to buy the next property? Thanks for all of your help in advance!

[Brittany Minocchi]

What is your current SFH worth, and what LTV is the lender quoting you? What's the minimum amount you could receive that would make it worth doing the cash out? You might be able to do better on the rate, which would make the figures a little more favorable. Not enough info to say for sure...

If it currently rents for $3,400 and your PITI is $2,500 - net $900. If it jumps to $3,090 - net $310.

If you buy the next property and it rents for $3,250 with a PITI of $2,600 - net $650. Between the two properties you're cash flowing $60/mo more than you were with just your first property originally. Not a huge increase in cash flow, but you're picking up another appreciating asset.