Cash-out refinance
Investment Property Cash-Out Refinance, Explained
A cash-out refinance turns trapped equity into capital for your next purchase. Here is how it works on an investment property.
A cash-out refinance replaces your current loan with a larger one and hands you the difference in cash. On a rental, it is one of the main ways investors recycle equity into the next deal without selling.
See the real cash a deal needs on the free cash to close calculator.
Ready to pick a lender? See how to choose a cash-out refinance lender.
Weighing a line of credit instead? See DSCR cash-out vs HELOC.
How long must you wait? See cash-out seasoning rules.
How much you can pull out
The cash is limited by the loan-to-value cap on a cash-out refinance, which is typically lower than on a purchase, often around 70 to 75 percent of the appraised value. So the appraisal drives everything: the higher the value, the more equity you can access while staying under the cap.
Seasoning
Many lenders require a seasoning period, meaning a minimum time you must own the property before they will refinance at its current appraised value rather than your purchase price. This matters most in a BRRRR deal, where you want to refinance at the new, higher value soon after the rehab. Seasoning rules vary, so confirm them up front.
How it qualifies
A DSCR cash-out refinance qualifies on the property's rent against the new payment, not your personal income. Run the numbers on the calculator first: pulling cash out raises the loan and the payment, which lowers the DSCR. The deal has to still cover itself at the larger balance.
The discipline that makes it work. Cash-out refinancing is powerful because it is tax-deferred capital you can redeploy, but it adds debt. Keep the refinanced property cash-flowing comfortably so a vacancy does not put you underwater.