Cash Out Refi Strategy

[Joe Ruggiero]

Hey all! I understand the process of a cash out refi - but what I don't understand is where the lines should be. For example, if you take cash out of the equity in my duplex what's the line for the amount of cashflow you should absolutely keep in the deal? How much of an increase in mortgage payment makes sense? How do you calculate your losses on the closing costs and lender fees? Is the strategy typically to take as much out while you can as long as you follow these parameters? I'm including my exact example below.

Current P&I: $1576
New P&I: $1837

Current Cashflow: $1272/mo
New Cashflow: $1011/mo

Current CoC return: 8.7%
New CoC return: 12.1%

Cash to close will be about 12K and I will be walking away with 75K at closing. The plan is to take this 75K and use it to buy another multi. Do these metrics make sense? Should I be looking at other metrics

Any help is appreciated.

[Jon Kelly]

@Joe Ruggiero your strategy should be set based on your goals. When you analyze deals do you have minimum CoC, IRR and cashflow per door metrics?

One of the easier ways to look at this comparing the interest rate on the refinance with the CoC return of the next property you will buy. If your interest rate is 3.75% and you can make 12%+ CoC on the next property then you may want to max out the loan regardless of what happens to the monthly cashflow.