WWYD: Should I refi my houses to gain leverage or not?

[Cori L.]

(My first post on the BP forum!)

So I realize that each investor has their own personal strategy, but I am posting this question because I would really like to poll other BP members and see what the majority opinion is. Here is my situation: I currently own four single family rental properties in my hometown in Florida. I live out of state with a good-paying job and we are saving up a good bit of money each month. It is not very difficult to manage the properties myself because I travel home often and I have family members who help me. I also would like to one day move back to my home town once it I have too many properties to manage from afar. Houses #1 and #2 are financed (both houses are worth about $75-80k and have loans of about $45k on each). Houses #3 and #4 are owned free and clear and I am trying to decide if I should refi them in order to gain leverage for future deals. Part of me says that I should refi because leverage will obviously help to me acquire properties faster. But the other part of me says that I shouldn’t do it, because leveraging will require more headache (more tenants, more repairs) and I don’t want to overdo it considering that I am currently living out of state. Also consider the following about these two houses: Houses #3 is worth $75k but it has a title issue that is currently preventing the refi. I have been told by my attorney that a ‘quiet title’ will be required and it will cost $2k-$4k in legal fees to take care of it (I could also wait 20 years and the title will take care of itself. Not a huge deal considering that it is cash-flowing very well and I intend to own it for that long). House #4 is currently only worth about $55k so I am not sure that it would even be worth it to take out a traditional 30-year mortgage with 80% financing. I have estimated that it might cost as much as $4k-$5k in closing costs so I wonder if it is even worth it?

So basically, I have four options. Which would you choose if you were in my situation?

Option A – Do the ‘quiet title’ on house #3 and cash-out refi it.

Option B – Cash-out refi house #4.

Option C – Go for max leverage and cash-out refi both houses.

Option D – Do nothing, keep saving up my cash for the next deal.

Which would you choose?  Thank you in advance for your opinion!