Had a chat with my credit union guy that made me rethink a cash out refi on my rental property

2 comments

2 Comments

Actually I'm not sure the credit union guy gave you the best advice here. Cash out refis can make sense if you're rolling that money into another deal or paying down high interest debt, but a lot of people forget about the tax implications and the fact you're resetting your loan term. You're basically starting over on that 30 year mortgage clock which kills your cash flow for years if the numbers are tight. Plus if rates are higher now than when you bought, you're eating that extra cost every month for no good reason unless the money is absolutely needed for something urgent. I've seen too many folks get talked into these because the banker makes a commission, not because it's actually smart for the landlord.

adam_hernandez1mo ago

A guy I know near me pulled $60k out of his rental last year and dumped it into a new fixer upper that still isn't rented out. Now he's stuck with two payments and the refi bumped his rate from 4.2% to 6.8%. That extra cost adds up quick when tenants are late or the place sits empty for a month. I get that cash is tempting but if you're not flipping that money into something that pays immediately it's just a gamble with your monthly expenses.