Million Dollar Question: Refi Warehouse to Buy More Rentals

[Hal Davis]

I have the opportunity to refi two warehouses appraised at $1M and pull $800k in cash out at 3.34% for 15 year fixed (no balloons, ~$5k in closing costs). 

Total gross rent: $9550 / month

Property Tax: $14,000 / year

Insurance: $7,000 / year

P&I on loan: $5,700 / month

Maintenance Fund: $500/month

Currently, Cash flow is $9550 - $1750 - $500 = $7,300

Projected, Cash flow is $9550 - $1750 - $500 - $5,700 = $1,600 with the initial principal payment of $3,450 

I have 20 doors in residential SFR, Duplex, Triplexes. This would take me up to ~50% leveraged on my entire real estate portfolio.

I believe there will be a buying opportunity at some point in the next 18 months due to this COVID.  No idea what I think about inflation/deflation and its impact on USD, but it will be hard for me to be convinced that a significantly lower interest rate will be available later.  So, having more cash to buy foreclosures or quick cash closes for 'motivated' sellers is attractive.

12 months from now I'll move to full time real estate investing / work optional and curious what BiggerPockets thinks.

[Jason Wray]

Hal, Your making a smart move based on your numbers.  You are 100% correct that rates are going to be higher in 24-36 months.  Rates are set to go up in January on all cash out refinances through Fannie/Freddie rate hit of (.50bps).  So like all rate hike trends the market will follow suit and we will start to climb back up on most transactions.  This will make you a little more cash fluid and put you into a stronger buying position as well.