Cash Out Refinance Allocation

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Topic Author
sportyman
Posts: 1
Joined: Mon Nov 08, 2021 9:21 pm

Cash Out Refinance Allocation

Post by sportyman »

Hi everyone,

Been lurking these forums for years and appreciate the vast amount of knowledge everyone shares with each other.
I have a particular circumstance that I find myself in that I will share as much as I can to give a snapshot of my current financail situation.
34 y/o - S corp sole employee - earnings roughly $4-550k/annually
$240k SEP IRA established (I max out the SEP IRa contribution annually)
Home owner with roughly 60% LTV at a 2.75% rate
Roughly $1MM in a private fund evergreen fund that that rotates my invested capital from the S corp at a avg return of ~13-15%

Advice needed:
In a sep. entity; a partner of mine and I purchased a investment property ($2.03MM all in inclusive of remodeling) in 2019 that we had intention of "flipping". With delays in construction and permitting; we ended up listing the property and were not able to sell due to timing of the market. We've had tenants in the property since and are now refinancing the property at a 4.15% rate for a 10year ARM I/O. This allows us to + cash flow the property and we are able to cash out $150k each (this was our initial investment from the property). The total liability on the property will now be $2.3MM. We currently have a tenant in the property from July 2021-July 2023. I want to add that the property depreciation helps with taxes since it has been held more than 2 years + the interest only mortgage is an expense to the LLC which helps with bottom line.

With the above circumstances of my personal finances/s-corp; what is the best method to allocate these funds. I do have cash reserves in place to keep funding my ever green fund that has provided a great ROI. I am thinking that the best is to just follow a one-fund portfolio approach and allow this money to *hopefully* return greater than the 4.15% borrowing cost of the cash-out refi.

Any advice will be much appreciated. Thank you in advance.
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