Cash Out on Investment?

[Julian Rodriguez]

Hello everyone.  I have a rental property that I owe $290,000, I bought it for $330,000 in 2010.  The property is valued at about $800,000 currently.  I have a 4.125% interest rate, monthly mortgage is currently $2,650 and my rental income is $4,450 per month.  

My question is, do you guys think it is a good idea to do a cash out refi and pull out about $350,000?  I would use the money to purchase another investment property to rehab and flip.  Any advice would be a great help.  

Thank you,

Julian R.

[Nathan Platter]

Hey @Julian Rodriguez ,

It all depends on your personal investing goals.

For 80% of the members here on BP, I would recommend yes, sell the property and roll those profits into your next deal.

Your equity ($510,000) is currently sitting idle and not doing anything. Of the many ways to evaluate an investment, a major one is Return on Equity (ROE) Assuming you're net profiting $500/month (guess) that's $6000 a year. 6/510 = 1.17% Return (on equity) That's bad.

Sell the property so you get all the profits back and put them into more flip deals. It's work but it'll generate better ROE than holding that rental.