Leveraging an Appreciated Property w/o Selling! Cash-out Refi!

[Ryder Meehan]

I don't by any means think this is anything new but wanted to share for those that may have forgot about leverage equity in an owned property to access capital for the next investment.  This is a powerful tactic that helps to significantly accelerate the speed at which one can grow a portfolio.

In 2012 I purchased my first MF investment property in the Lower Greenville neighborhood of Dallas, TX. The market was still quite low at that time and has since grown like the city has never seen before! This tri-plex was bought on MLS at $210,000 - I put 20% down, $42,000 to purchase this. At the time it seemed like a fortune and it kind of still does! It took me years at my day job to earn that cash savings. As of today it now appraises for $490,000 - with about $25,000 in rehab/maintenance since the time I bought it.

Working with a local lender I'm completing the process of doing a cash-out refinance where they pay off the balance of the original 2012 loan and then give me cash on the difference between what is owed on that loan and the current appraisal - minus 20% equity to remain in the property.  4.75% 30-yr fixed.

I'll be able to draw over $200K in capital that I'll immediately then roll into a large self-storage facility purchase (with a partner) as my half of that down payment.  So if all goes as planned I'll be keeping my cash-flowing tri-plex and adding a 300-unit storage facility all from my original $42K down payment.

Of course I'll be making a higher monthly payment now that my mortgage on the tri-plex has doubled but the storage facility cash-flow can absolutely cover that and a lot more.  At 4.75% 30-yr fixed that is very cheap money - especially when it's liquid capital.  Try to get that at your local payday loan shop or hard money lender.

So I think the point of the story is, if you have owned a property or properties for a healthy period of time and they have appreciated - you may want to talk to a lender about grabbing some cash to put into your next deal.  Just make sure the cash-flow covers the increased loan but any good deal should at this interest rate.

I'll post an update once it goes through but couldn't wait to share the tip!