Would you do a cash-out refinance in this situation?

[PseudoStache]

I am fortunate to currently have a significant net worth and salary.

I also have a rental property that I can probably cash $80K out of right now at 4.25%.

My plan is to use this towards another rental property purchase, but I do not have a property identified yet.

I do live in a little fear that my job may end in the near future (less than 2 years) which would probably make me ineligible for a cash out refinance if I were to lose it.

However, today, I would be approved for this cash out without issue.  I would likely park this money in my taxable account and work at finding a new rental/rentals.

Dumb?

[sammybiker]

I don't think this is dumb - plus, if you're buying cash, you want to have it available so that you can make quick offers with even quicker closing terms.

Looking longer term, rates will likely be higher than they are now in two years.  So I guess the only question is your buying timeline - sounds like you'd be ready to purchase in the next <6mo if the right property came along.  If that's the case, I'd pull the cash now, secure that long term low interest rate and be ready to shop. 

Depending on where in the country you are, Winter can be a great time to get an extra discount from tired sellers.

[adamcollin]

I think it is a wise idea to purchase another rental property.

[zephyr911]

If you're confident about new investments beating that 4.25% by a decent margin, cash out. I'm in a somewhat similar position and I'd do it in a heartbeat.

[hucktard]

I would do a cash out refinance as long as I was confident that I could make the debt payments under reasonable scenarios, like being un-employed for 6 months, stock market crash, rental vacancy etc...

[zephyr911]

Let me be clear: I'd not only cash out the $80K, I'd leverage as much new property as I could with it. If your prospects aren't cash-flow positive with 80% financing, keep shopping.

[CashFlowDiaries]

I am considering using this same tactic now to purchase my 6th rental property.   I have quite begun the process but the only way it will work for me is if my new rental more then pays what the extra cost it would be to take out the refi.   In other words, i have to be cash flowing by leveraging that money or the deal is no good to me.

If you can be sure that whatever you invest in from that refi is going to be used to pay the extra loan $amount plus handle expense then yes it is a great idea to do that.  Especially now that the rates are still pretty low.  I consider 4s low.