Q RE: cash out refi with no target

[Jim Chuong]

I would like to hear people’s thoughts on doing a cash-out refi when an investor has a lot of dead equity

1) at what point would you start thinking about a cash-out refi start. One extreme would be 100% equity and 0% debt but I’m sure people consider it far before this point. What point is that?

2) would you cash-out refi if you don’t have an immediate opportunity? On the one hand, you will have the cash to move quickly if an opportunity appears but on the other hand, your equity is still increasing so you could be pulling out more cash if you did the refi later (remember you don’t have an existing opportunity)

3) any other thoughts appreciated

Thanks

[Amy Kendall]

Generally, the more equity that you have, the lower your return becomes over time.  That is the power of leveraging your money, but as you know, people have very different opinions on how much leverage is too much.  I don't think that there is one right answer here.  If you are actively looking for deals and are confident one will come along, and if you have no other way to finance that deal, then yes, I would move forward with the cash out refi.  Out of the investors I know personally, the ones that actively use their equity to grow and purchase more properties are significantly more wealthy than those who have not.