Cash out Refinance at a higher interest rate to purchase rentals?

[Eliud Vazquez]

Hello everybody, first time posting here. I don't have anyone to personally discuss this with so I was hoping I could get some guidance through the forum. I currently own one investment property (renting for $1.6k) that I purchased 2 years ago via a VA home loan (was my primary at the time). 3 Months ago I purchased another home and have a new primary. Because of this, I am unable to pull a HELOC in Texas for the investment property, or at least I've had an extremely difficult time finding banks who are willing, due to the location, and it being on my investment property. My other option is to do a Cash-Out Refinance, however, this would mean my interest rate of 3.2% for a 175k loan would increase probably to the 6s% for maybe 225k. The reason for refinancing is that I had quite a bit of money saved from my deployment that I dumped into the principal the first year I bought the house. I owe 105k on the 175k loan. A rough estimate would be that my cash-out refinance would come out to $90K, which I can then use to purchase another rental down the road. Is this simply a math question? I'm a bit stuck as to whether or not I should refinance or just wait it out until next year when I have enough funds to purchase another rental, however in this case I could push it to 3 with me putting an extra bit of money for the third one. I did the math and on the estimates, it shows:

OLD Loan:

CoC: $385

New loan Estimate:

CoC: $100

Possible purchases with refinance based of current market:

CoC (for 3 additional houses): $1,000

- I also estimated the ROI and it was roughly similar if I account for 3 more homes. I live in a city of 250k and houses aren't too expensive, they've been declining in my market since last year's peak.

Is there something I am not seeing that I should look out for if I decide to cash out refinance? I've never done this before so maybe I'm seeing this through tinted glasses and am missing an important variable when considering this option. Thank you all!

[Erik Estrada]

Quote from @Eliud Vazquez:

Hello everybody, first time posting here. I don't have anyone to personally discuss this with so I was hoping I could get some guidance through the forum. I currently own one investment property (renting for $1.6k) that I purchased 2 years ago via a VA home loan (was my primary at the time). 3 Months ago I purchased another home and have a new primary. Because of this, I am unable to pull a HELOC in Texas for the investment property, or at least I've had an extremely difficult time finding banks who are willing, due to the location, and it being on my investment property. My other option is to do a Cash-Out Refinance, however, this would mean my interest rate of 3.2% for a 175k loan would increase probably to the 6s% for maybe 225k. The reason for refinancing is that I had quite a bit of money saved from my deployment that I dumped into the principal the first year I bought the house. I owe 105k on the 175k loan. A rough estimate would be that my cash-out refinance would come out to $90K, which I can then use to purchase another rental down the road. Is this simply a math question? I'm a bit stuck as to whether or not I should refinance or just wait it out until next year when I have enough funds to purchase another rental, however in this case I could push it to 3 with me putting an extra bit of money for the third one. I did the math and on the estimates, it shows:

OLD Loan:

CoC: $385

New loan Estimate:

CoC: $100

Possible purchases with refinance based of current market:

CoC (for 3 additional houses): $1,000

- I also estimated the ROI and it was roughly similar if I account for 3 more homes. I live in a city of 250k and houses aren't too expensive, they've been declining in my market since last year's peak.

Is there something I am not seeing that I should look out for if I decide to cash out refinance? I've never done this before so maybe I'm seeing this through tinted glasses and am missing an important variable when considering this option. Thank you all!

There is a program that allows for a second mortgage on non owner occupied properties. Max CLTV is 75% for bank only statement loans and the max loan amount is $450,000. Also DTI cannot exceed 50%