Buy and Hold. Self finance cash to Cash out mortgage

[Dean Engel]

Background:  have 2 rentals purchased in the 90's, looking to start investing again. I am interested in buy / hold (or buy and flip if right property) properties. 

Financing strategy question.

I have the assets to buy properties Cash, and thinking this is an advantage in buying properties at a good price.  Intention would be to buy, rehab and then rent.

Strategy discussion: 

  Upon completing the rehab, I would then take a Cash-Out mortgage to return liquidity to my portfolio, and then likely purchase next house with that cash.

Help me understand if I am missing something in this model?  do others do similar?

Example: 

 Buy property for $200k.  Rehab $50k. Cash.  AFV $300k.  Assuming  25% down.  Refinance would pull $225k of $250k invested.  costs: 2 title costs +  1 finance closing costs (vs 2 title, and 2 finance closing)

The alternative is to buy with financing, and then cash out financing later (or leave $50k down + $50k rehab investment in property)

[Charlie Fitzgerald]

I have an entirely different take on this and it's not because I am a Private Money Lender.  I do not ever believe that in the grand scheme of things the advantages of using all my money (meaning no financing..not all assets) gives me so much additional advantage in the market, that the risk ratio makes it worth it.  Additionally, with the current trend towards more and more restrictive conventional lending guidelines in the post Dodd-Frank environment, I never want to rely on a conventional loan program for my cash exit strategy, to allow me to turn my money again by acquiring additional investment properties.  I like transaction speed, asset based qualifying, unlimited financing capacity and product/program dependability and most importantly, leverage (20-30% of my money in the deal vs. 100% of my money in the deal.  I am more than willing to pay the higher interest rate and 1-1.5 additional origination points for Private Money, in return for all the advantages outlined AND interest only payments while I have the money in play.  I can do a minimum of 3-4 times more deals a year using Private Money Lending with few if any headaches.  Conventional lending is very restrictive now. After October 3, 2015, it will be even more so.  Just my $0.02 worth.