Does A Cash Out Refinance Make Sense For My Situation?

[Patrick McCracken]

Hi all,

Trying to slowly build our buy and hold portfolio in Buffalo NY to eventually allow rental cash flow to replace my W2 salary. Right now I own 2 duplexes. One was a personal residence that we bought about 10 years ago for about $89,000 and have since moved out of and rent out both units. It's now worth around $200,000 and I am trying to figure out if I should cash out refinance and end up with about $63,000 (leaving 70% LTV) cash to use for another rental down payment, or if I should just ride out the remaining 20 years of this mortgage with a small balance (only $62,750 left). It's going to cost around $11,000 in closing costs to do the refinance, and I would be going from 4.125% to 3.125% with another 30 year fixed loan for $140,000.

Is there a downside to doing the cash out refinance that I'm not thinking about? Wish I could tap into all of that equity another (read: cheaper!) way, but it seems impossible to get a HELOC on an investment property. Any thoughts/suggestions would be greatly appreciated!!

Thanks,

Patrick