Cash Out Multiple Choice

[Aaron Rocha]

I am 31 years old, about to refi, and ready to buy my 2nd property. Hopefully a multi family unit. My single family house in Denver is worth approximately $250k. I paid $125k. I owe $100k on a 4.65% 30yr fixed. My current mortgage is $900 total. Current rental rates for my area are $1,800-$2,200 month. I am 98% ready to close on a conventional refi and I'm having second thoughts on how much or if I should cash out. The contract is written up at $70k cash out 4.19% 30yr fixed. New mortgage $1,190 total. After I refi, ultimately I would like to purchase as many properties as they will allow me to, as quickly as they can. My Lender says I would be able to get one FHA loan (up to 4 units) with 3% down. After that 1st FHA, I imagine the next conventional loan would be a higher % down. Should I: A) Cash out $70k, and use it to put more $ down on my next purchase? B) Cash out $70k, save it, and take advantage of the low 3% down? C) Cash out $40k and keep my payments the exact same? $900 monthly D) Don't cash out, refi to lower monthly payment, and cash flow an extra $200 per month? (Pay mortgage faster?) E) Other (explain) Any and all help is greatly appreciated. I may be missing more info but this should give you a brief view of my situation. Thanks in advance!

[Michael Wentzel]

I choose "E". I would take the cash out. Then I would find a market where property is more modestly priced than Denver. After getting to know my new market, I would buy something run-down for $40,000. Rehab it with $20,000. Get it appraised for $80,000. Refinance my cash back out with a commercial/ portfolio loan. Turn the property over to a property manager and go do it again.

Mike