Refi for down payment on new primary or investment property?

[Taimur Ghaznavi]

Hi All, 

New to the site here and looking for some advice on the right next move as my wife and I start to dip our toes into rental properties. Here is a summary of our situation:

Current state: We have a primary that we bought 5 years ago for $305k, and is now estimated around $425k (loan down to $260k). We'd like to refi for both the lower rate and cash out some of the equity so we can use it for the next purchase (think we can get about $80k out at an 80% LTV).

Goal: Have a rental property with at least some cash flow AND purchase a new primary by end of 2022.

Options: Based on my initial understanding (which admittedly could be flawed), I have a few options:

1. 1. Refinance and current current: Refinance primary to get the $80k out and rent out current property, use that as down payment on new primary (let's say for purchase price of ~$500k, know it's less than 20% down)
2. 2. Refinance, new investment and sell primary: Refinance primary to get ~$50k out, find a separate cheap investment property that can cash flow (aim for under $250k purchase price so we can put 25% down), and then sell the primary at end of next year to get remaining equity out to use as a down payment for a new primary (assuming it will be about $80-$100k net with expected increase in value due to being in a hot neighborhood and purchase price of ~$500k, know it's less than 20% down)

Considerations: I am expecting the next primary to be a place where we spend 4-5 years max (expecting significant increase in career based income after initial partnership buy in). My wife can also be an active property manager as she is not currently working. Based on current HOA caps, we could rent for about 3 years and then would need to see if anyone else is looking to rent as they would have priority (currently no one on waitlist ready to rent). May have to petition board to increase rental cap from 25% to 30% to open up more rental permits.

We are open to any and all thoughts, advice, even harsh doses of reality wherever you see fit! Appreciate it and looking forward to getting more involved in these forums.