- 01Investor refi is about velocity of capital — pulling equity to deploy into the next deal
- 02Cash-out refi at 75% LTV on a $200K property puts $50K in your pocket tax-free
- 03HELOC on your primary gives you a revolving line for down payments — interest-only during the draw period
- 04The 'refi or sell' decision comes down to DSCR: if post-refi cash flow stays above 1.25, hold
Show Notes
Why Refi Is Different for Investors
Homeowners refinance to lower their payment. Investors refinance to recycle capital. That's the mindset shift. You're not trying to save $200/month. You're trying to pull $50,000 out of a property and put it into the next one. One property becomes two. Two becomes four. The refi is the engine.
Cash-Out Refi Mechanics
You've got a property worth $200,000. You owe $100,000. Your equity is $100K. A lender will typically go to 75% LTV on an investment property — that's $150,000 in total loan amount. Pay off the existing $100K mortgage, and $50,000 lands in your pocket. Tax-free. No 1031 exchange required. No sale.
The catch: your payment goes up. The property has to support it. DSCR is the test — lenders want 1.25x minimum on rental refis. A $200K property with $1,800/month rent and $400 in expenses has $1,400 in NOI. At 7.5% on a $150K loan, your payment is about $1,050. DSCR is 1.33 — you're in. Bump the loan to $160K and the payment jumps to $1,120. DSCR drops to 1.25 — right at the line. Know your ceiling before you ask for the max.
HELOC as a Revolving Deal Fund
A HELOC on your primary residence gives you a revolving line. Draw when you need a down payment, pay it back when you sell or refi the new property. Interest-only during the draw period. A $100K line at 8% costs $667/month if fully drawn. Use $30K for a down payment? $200/month.
A lot of BRRRR investors use a HELOC to fund the initial purchase and rehab, then pay it off with the cash-out refi when the property is stabilized. The HELOC is the bridge. The refi is the exit. The downside: rates float. If prime jumps, your payment jumps. Use it for short-term capital needs — earnest money, rehab draws, down payments — then pay it down when the deal closes.
The Refi-or-Sell Decision Framework
When do you refi, and when do you sell? Three questions:
- Does the property still cash flow after a refi? If post-refi DSCR stays above 1.25, you can hold and pull equity. If it drops below, maybe it's time to sell.
- Do you need the capital for a better deal? BRRRR investors refi to recycle capital into the next buy-rehab-rent-refi cycle. If you've got a stronger opportunity elsewhere, pull the equity.
- What's the tax hit on a sale? Appreciation triggers capital gains. A 1031 exchange defers it, but you've got 45 days to identify and 180 to close. A cash-out refi avoids the sale entirely — no tax event, no depreciation recapture, no 1031 clock. Sometimes the refi is the cleaner move.
One more thing: LTV matters for refi pricing. 75% LTV might get you 7.25%. 80% might push you to 7.5% or 7.75%. Sometimes pulling 70% instead of 75% saves you 25 basis points — and that 25 bps can mean the difference between a property that cash flows and one that doesn't. The refi isn't just about how much you can pull. It's about how much you should pull.
Resources Mentioned
- Financing Your Investment Property — the complete guide to loan types, qualification, and refi strategy
- BRRRR Refinance Timing — when to refinance and how seasoning periods affect your timeline
- Deal Analysis Guide — the metrics framework behind the DSCR calculations in this episode
- Rental Property Calculator — run your own refi breakeven and DSCR analysis with real numbers
- Freddie Mac Mortgage Rate Survey — weekly updated 30-year and 15-year fixed rate averages
The ratio of a loan amount to a property's appraised value, expressed as a percentage — a 75% LTV on a $200,000 property means a $150,000 loan and $50,000 in equity.
Read definition →Cash flow is what's left in your pocket after a rental pays all its expenses — including the mortgage. NOI minus debt service. What actually hits your bank account each month or year.
Read definition →A real estate investment strategy — Buy, Rehab, Rent, Refinance, Repeat — that lets investors recycle capital across multiple properties by forcing equity through renovation and extracting it through refinancing.
Read definition →A 1031 exchange (IRC Section 1031) lets you sell an investment property and defer capital gains and depreciation recapture by reinvesting the proceeds into a like-kind replacement property of equal or greater value, using a Qualified Intermediary to hold the funds.
Read definition →A ratio that measures whether a rental property's income covers its debt payments — calculated by dividing rental income by total debt service (PITIA), where 1.0 means breakeven and 1.25+ means strong cash flow.
Read definition →
