Long time listener, first time poster...cash out refi

[Michael Metzger]

Hello all,

I’m contemplating a cash out refi versus a straight 30 yr refi for a rental property. I’m pretty sure I know the route I’m going to take, but I would like to hear a bit more from this community to see if I’m missing anything.

If I go the traditional refi route, I would shave off about $400-$500/month (give or take what rates do in the next month) from monthly mortgage and cash flow $600-$700/month on the property. Seems pretty great.

If I go with a $30k cash out, I would only be shaving off $200-$275/month from monthly mortgage. Not as great.

The $30k cash out would go towards purchasing a small Airbnb loft style unit on my primary property (not ADU, because its under sq. ft. requirement for permanent setting to land) that can be rented out. Expected average monthly short-term rental would be around $1200/month based upon comps in the neighborhood. I believe I will still be able to use the loss from purchase of unit to offset rental income from rental property- unless it not being on a foundation is something I missed in the IRS code for a technical rental unit??

Anyway- $30k out or straight refi is my question??

Thanks everyone!