All Forum Posts by: Corey M.

Thanks for your reply. What happens if I were to pay for a place with $100k cash now, but then I take out a cash out a cash out refi for 100k @4%. Since I already bought the house with my own money, can that "new" money from the refi replace the original $100k for tax purposes since it has interest that can be written off? 

If I take equity out of my primary residence by doing a cash out refi, and that equity is used to buy a rental property, is the mortgage interest deductible? Everything I've looked at seems to point to it only being a deduction if it's used to make capital improvements on your primary residence. But that doesn't make sense since you can do a cash out refi on a rental property and deduct all mortgage interest. A loan is a loan, so I'm not clear on the tax rules.

If the answer is no, that you can't deduct mortgage interest from a primary home cash out refi, why would anyone ever do it? Seems like it'd make more sense to just get a new loan on the property that can be fully deducted. This is significant. On a $200k house at 4% interest, you'd be missing out on an 8k deduction, which would likely outweigh the cost of the higher interest rate associated with a rental property. 

Am I wrong here? 

Hi,

I have about $340k of equity in my home that I'd like to put to work. I'm currently paying 3.625% interest on a 30 year fixed, and am considering taking out $250k in equity, which would likely be at a similar interest rate. 

If I want to buy a rental property for $100k, but only put 20% down, how would I do this without creating another loan on top of the refi? It seems that if I were to get $250k out, I could just buy the house outright for $100k, but then there would be no leverage. Or would there be since the cash out refi loan is larger than the original loan on my property? I'm sure the cash out refi interest rate would be lower than a rental income rate, so I'm trying to understand the best way to go about this. 

Hi all -

Newb here, so please forgive me if my questions are a little mundane. I've read through this thread, and I am a little confused about taking a loan VS. Cash buy. I believe the Spartan owner and another poster said something about taking the cash flow and putting it toward the loan is the best way to go - that way you're paying down the loan quicker and building the equity. 

But I'm not totally sure I understand this logic. If you can buy a house for $100k cash or put $25K down on each of four houses, isn't the latter better? You're essentially quadrupling your returns with leverage. And if the cash flow is covering the loan on each of your four mortgages, why would you want to pay it down sooner? 

I am asking this because I have about $200k in cash to spend, but I'm not understanding the value of buying a house outright and tying up all my money. For one, it'd take liquidity away. But it would also reduce the potential tax write offs - like mortgage interest, right? 

Would appreciate any feedback. 

But is it worth it to do a cash out refi, pay closing costs, etc to buy a rental in another state? And will that rental net a significant benefit over just a long term stock market investment, which averages about 8%/yr?

Hi,

I purchased my residence 7 years ago for $320k at 3.625%/30 yr mortgage. I have 220k left on the loan and the house is now worth $560k. I am thinking about taking a cash out refi to buy other properties, but I love in LA where just keeping my money in my house would probably net me 10%/yr equity growth. 

Is there any value in doing a cash out refi, which would net me about $260k in cash? I also have about $120k cash to work with and a 760+ credit score.  My industry is very volatile, and so I could feasibly be out of a job for 6 or more months every two years or so. 

I am considering rental properties, but in any relatively nice area in LA, a 800 SW ft apt will be at least $450k, which means I couldn't afford to buy it for cash. 

I'm wondering what I should do with my money. I can keep my free cash in the stock market. Leave the equity in my home and not refi. Or I can pull some or all the equity out of my house and buy another property to create extra income. Mind you, there will be no cash positive properties in LA, but equity growth is great here. 

Thoughts?