Cash Out Refinance or Not

[Michael Montana]

Backstory: We purchased our primary residence 3 years ago and now have about 100k in equity thanks to the current real estate market. And with the low interest rates, we are going to refinance our house. We currently have one long term rental property, and we have enough in savings to do one BRRRR.

I'm interested in hearing what you would choose when faced with the following two options:

1. Refinance our home and take cash out to buy an additional rental property. Because of the cash out part, the interest rate is 3.375% and would save us about $100 on our current mortgage payment. This would require a $500 appraisal. 

2. Refinance our home and don't take cash out, giving us a 2.99% interest rate and lowering our mortgage payment by $400. 

There are pros and cons to both, so we're curious what other real estate investors would do. 

Thanks!

[Joshua McMillion]

@Michael Montana

I would go with option two, given the position I am in and my current acquisition timeline. I aggressively save from my W2 job for real estate investing and am never a huge fan of pulling money out of a property to finance another unless the numbers work. Are you planning to rent out your primary residence? Do you have a team in-place to enter into BRRRR? Pulling out the equity can always be an option, but if you can save and use the additional $4800 you will get from the REFI each year from your primary residence to purchase a home, I would recommend it.

I'm always a fan of investing from a position of strength and not overleveraging yourself. 

Sincerely, 

Josh