Refinance?

[Anth]

We purchased a burned house in Portland, OR. The purchase price of the house and the cost of the remodel (did the work myself) totals $280,000.  The current value of the home is $450,000. We are considering a cash out refinance to harvest our equity to purchase another rental property. Is this a bad idea? Our current income is $130,000 annually with one parent at home. Our current interest rate is 4.5.

[Gone Fishing]

What is your current mortgage balance?

Cash out rates are typically higher than a straight refi, so go ahead and get some quotes to see what types of rates you are looking at.

Are you going to use the cash out to buy the rental outright?  Or is it just going to provide the downpayment for another loan?

Generally real estate investors like to keep the risk (loan) for an investment property on the investment property, so in the event something goes wrong, they can let it go and hang on to their primary residence.  This is exactly why investment mortgages carry a higher rate.

Using cash out proceeds for investment purposes might be a red flag to some lenders, when you are asked what the money is for, you might do better by saying "replentish personal cash" or something equally as vague.

How much liquidity do you have on hand?

[Anth]

Our current mortgage balance is $282,465. We would use the cash out as a down payment (real estate in Portland is expensive) We ve been quoted a rate of 4.3. We have $10,000 of cash on hand and $50,000 in an unused eloc on another investment property that appreciated rapidly

[Gone Fishing]

Just me, but I think you are trying to take on too much leverage.  At a minimum, you should probably have 10-20% of your total debt in unencumbered liquid assets (cash, stocks, bonds, etc), and a ELOC is not liquidity.

If your real estate market continues up you would probably kick yourself for taking my advice, but just remember, leverage cuts both ways.  Right now, all it would take to put you out of business is a layoff and some vacancy.  Hold off a bit, build your liquidity, and save up a proper down payment.

If you are planning to stay in your primary residence for 5+ years a straight refi would probably be worth it.