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Updated over 7 years ago on . Most recent reply

User Stats

40
Posts
6
Votes
Jeff Minc
  • Rental Property Investor
  • Santa Barbara, CA
6
Votes |
40
Posts

Refinancing to Pull Cash Out

Jeff Minc
  • Rental Property Investor
  • Santa Barbara, CA
Posted

I was hoping for some feedback on this idea. I currently rent out a condo I own which cash flows roughly $450 a month. I like the cash flow but don't need it. I bought it in 2013 with a 30 year fixed at 3.66% (owner occupied initially). There is roughly 80K in equity to pull out if I were to refinance which I would like to use to buy more cash flow property. Does it make sense to refinance at a higher rate (4.5-4.8%)? This would eliminate most of the cash flow but I could use that 80K to buy more cash flowing property to replace that and own more units. 

This would be my first refinance. I feel like this makes sense I just feel strange refinancing at a higher rate. Any thoughts?

Most Popular Reply

User Stats

138
Posts
71
Votes
Pearce G.
  • Investor
  • Hendersonville, NC
71
Votes |
138
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Pearce G.
  • Investor
  • Hendersonville, NC
Replied

@Jeff Minc at $450/mo, you're earning 6.75% annually on that 80K of equity.  P&I on 80K at 4.65% 30yr adds $412 to your cost of owning the condo.  To generate a higher return, you have to cash flow more than $412/mo after reinvesting the 80K.  Very doable, but don't forget to figure in your transaction costs.

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