Refi now or wait?

[Brandon Griffin]

Hi BPers,

Here is the scenario. I purchased a primary residence in 2010 for 190k. Zero down VA loan 4.5%. Home became a rental in summer 2012.

Similar homes are now selling for 225k. (Conservatively) 

Current loan balance 155k.

Current rent is $1620  

Mortgage is $1300

Before I found BP I was planning on doing a refi just to get a lower rate/ lower the mortgage/ increase cash flow.  But now i'm considering a cash out refi to put towards a second rental property.  

Whats the better strategy?  Increase cash flow on investment 1or cash out to put funds towards a second property?

Thanks!

[Scott Trench]

@Brandon Griffin I'm sure that there are people out there smarter and better at this than I. I just refinanced a rental property last month though, and I chose NOT to take the money out, even though I probably could have gotten about $20K.

The reason for this is that I like to be conservative, and I felt - why risk a win? I bought a great asset that produces stable monthly cash flows and appreciated significantly. It's time to leave that asset in place, maintain it professionally, and use the reliability of that asset to lower the risk on my next, untested property. 

That said, if I didn't prefer to work a full-time job and invest on the side, and was willing to put in the time needed to make large amounts of leverage less risky, I'd definitely consider taking the cash out and leveraging up on the next one!