In the current lending environment, financing can be hard to find, and the terms may be more restrictive than what you experienced in the past. Best to be prepared, so here are some issues to consider: Unfortunately, it’s not the ’70s or even ’07 anymore, so while the plan is sound, the execution may present a few challenges. Given the same 70% LTV, $150,000 would be a sufficient down payment for a $500,000 property, i.e. Your current loan is $550,000, which would leave you with $150,000 to use as a down payment on another property. So, you expect to obtain a $700,000 mortgage. The refi loan has to be small enough to satisfy the LTV required on the current property, but big enough to give you sufficient cash to use as the down payment on the new property.įor example, let’s say your bank will loan 70% of the value of your strip shopping center, which is appraised at $1 million. How much is enough? That will depend on the Loan-to-Value Ratio required by your lender. 
Of course, you need to have enough equity in your current property. In fact, that’s exactly what I did when I started investing back in the ‘70s, so to me at least, it seems like a brilliant idea.
Your plan – to extract some of the equity from an investment property you already own and use that cash as down payment to purchase another – is fundamentally sound. “Could you talk about refinancing an income property in order to purchase a second income property? I’m trying to understand the refinance process and how you can use it to your advantage in order to build a real estate portfolio. One of our Facebook fans, Tony Margiotta, posed this question, which I’m happy to try my hand at answering here:
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