Still Common To Refiance Inv Properties To Acquire More?
Hey guys. I was curious what the general consensus is when trying to expand your REI empire. I have read many books which tell you to refinance your current investment properties, take the equity and use that as the down payment on the next property or properties. You will then have more properties hopefully generating cash flow and appreciating. Do the heavy hitters here use this strategy or is it no longer valid?
I have talked to banks who also let you pledge the equity in one property as a down payment on another.
I extract the equity out, through HELOC or refi.
I buy far below value and add substantial equity through rehab, so I am not worried about market downturns. Also, I am holding, not selling, so the value of a property to me is the rental income, which is always far more than the debt service on my properties. All an increased property value does is drive up the taxes, forcing me to charge more rent or reducing my cash flow.
If I could expand without borrowing naturally I would prefer that, but instead I am counting on a rapidly depreciating dollar to reduce my debt burden in real terms even faster than my tenants are paying it down for me. If the economy tanks to the point where no one can afford rent (great depression style) I will be in trouble as far as my rentals are concerned (naturally I have a back up plan to take care of my family), but short of that I see the down economy, and especially the depressed housing market, as benefitting me.
Chris