cash out refi to grow portfolio or slower growth?

Question

I'm really trying to figure out which is the best strategy. I can cash-out refi on some properties and get similar interest rate to what i currently have or even slightly lower interest but I would be starting the 30 year over again whereas I currently have about 4-6 years already paid down. But, I could get a substantial amount of cash out that could aid me in doubling my portfolio, albeit with worse returns given today's market. Should I continue to enjoy higher returns on the existing property (and grow portfolio slowly), or lower my margins but increase my portfolio size quickly?

Whitney Hutten · Answer

@Ryan McCook If you are in the accumulation phase of your investing, then it could make more sense to do a refi and continue to grow (TK, rent-ready or BRRRR).  If you are nearing retirement, then the cashflow might be nice.

Joe Villeneuve · Answer

The answer to your question is hidden in your question...in plain sight.

Have you run the numbers out, over the next 10 years, using both options?

Increasing your portfolio size will INCREASE your margins...not decrease them.

Using the BRRRR method will actually slow you down...not speed you up,...and WILL decrease your margins.

John Morgan · Answer

@Ryan McCook

This is a great question. And I asked myself this last year. So...I decided to do three cash outs in the last 7 months to expand. And I’m only making $100/door on all three of my new properties due to high real estate values in my area. I’m ok with that. I took out three 15 year mortgages with my cash outs including doing one BRRRR. Time will tell if i made the right choice! Dave Ramsey fans will say I’m an idiot. 2 out of my 9 properties are paid off so I’ve got about 3k/month cash flow coming in which helps when things break. But it’s a gamble and I’m willing to take on a little risk. If I didn’t, I would be stuck having just one paid off rental giving me a high monthly return. Good luck!