Video Mailbag Episode 6: Should I refinance my home to buy a rental property?

Pete,

I have a financial question that I have not seen many experts write about. Should I refinance my house and use the equity to buy a rental/investment property?

Mackenzie

Hey Mackenzie,

This question makes me really nervous. Talk about risk!

By tying an investment to your home/your shelter/your place of refuge, you are putting a lot on the line.

I own a rental property and when I tell you I spend thousands a year on maintenance and upkeep, I'm not exaggerating.

If you can't afford a down-payment in cash, how are you going to have the cash to pay for repairs and issues as they come up (and they will come up)? You could easily find yourself in a situation where you have to borrow money to pay for repairs on a property you had to borrowed money to buy. It's not a great idea.