Cash-Out Investor Refinance
The financing step that makes BRRRR actually compound. Cash-out refinance an existing rental, conventional or DSCR, to release equity for the next acquisition. Up to 75% LTV on most paths.
Quick answer
- Purpose: pull equity out of an existing investment property to redeploy, typically into the next acquisition.
- Conventional cash-out: max 75% LTV on 1-unit; 70% on 2–4 unit. Subject to standard Fannie / Freddie investor guidelines.
- DSCR cash-out: max 70–75% LTV. Subject to property's DSCR.
- Min FICO: 680+ for cash-out (higher than purchase).
- Seasoning: typically 6 months of ownership before cash-out (some programs allow 3 with delayed-financing exception).
- Reserves: 6 months PITIA on subject; conventional adds reserves on every other financed property in your portfolio.
The BRRRR mechanic, financed
BRRRR. Buy, Rehab, Rent, Refinance, Repeat, relies on the refinance step releasing enough equity to fund the next purchase's down payment. The cash-out refinance is the engine that makes the strategy compound. The math works only if the cash-out LTV and timing line up.
Two paths, depending on portfolio size and tax situation
- Conventional cash-out: sharpest pricing if you're at properties 1–6 with strong FICO and clean tax returns.
- DSCR cash-out: preferred at properties 7+, when tax returns understate cash flow, or when closing in an LLC.
Cash-out LTV by path
| Path | 1-unit max LTV | 2–4 unit max LTV | Min FICO |
|---|---|---|---|
| Conventional (properties 1–4) | 75% | 70% | 680 |
| Conventional (properties 5–6) | 70% | 65% | 720 |
| Conventional (properties 7–10) | 65–70% | 60–65% | 720 |
| DSCR (any property number) | 70–75% | 70% | 680 |
Worked example — recycling equity for the next acquisition
Investor owns a Mesa rental purchased 18 months ago for $300,000 at 25% down. Current value (after $40K of rehab): $400,000. Current loan balance: $215,000.
| Step | Amount |
|---|---|
| Current property value | $400,000 |
| Cash-out LTV (75%) | $300,000 |
| Less existing loan payoff | ($215,000) |
| Less closing costs (~3%) | ($9,000) |
| Net cash to investor | $76,000 |
That $76,000 funds a 25% down payment on roughly a $300,000 next acquisition, effectively letting the existing property "buy" the next one.
Illustrative. Real cash-out math depends on appraised value, current loan balance, and closing costs.
Things to plan for
- Seasoning. Most cash-out programs require 6+ months of ownership before cash-out. "Delayed financing" exceptions exist when the original purchase was all-cash.
- DTI vs. DSCR for the new property. Conventional underwriting on the subject's cash-out factors the new payment into your DTI. DSCR cash-out doesn't, only the property's DSCR matters.
- Reserve burden grows. Conventional requires reserves on every financed property in your portfolio. As the portfolio grows, the cash you need to keep liquid grows too.
- Tax timing. Cash-out proceeds aren't taxable income (it's loan proceeds), but interest deductibility on the new debt depends on use, check with your CPA.
FAQ
How long do I have to own the property before cash-out?
Standard seasoning is 6 months. If you originally purchased all-cash, 'delayed financing' rules may allow earlier cash-out (typically up to the lesser of original purchase price + closing costs or appraised value).
Can I cash out on a property held in an LLC?
On DSCR, yes, directly. On conventional, the property must be in your personal name; LLC-titled property either needs to be transferred personal first or financed via DSCR.
Will cash-out LTV improve if I take less cash?
Possibly, some programs offer better pricing on rate-and-term refis (no cash to borrower) than full cash-out. If you only need a small amount, sometimes a HELOC on the property is more efficient.
Are appraisals more conservative on cash-out?
Investor cash-out appraisals tend to be marginally more conservative than purchase appraisals because the appraiser knows the loan-to-value pressure. We model with a 5–10% conservatism buffer when planning cash-out.
What if my DTI breaks on the conventional path?
Switch to DSCR, the property qualifies on its own DSCR, and your personal DTI doesn't enter the calculation.
Curious if Cash-Out Investor Refinance is the right fit?
Bring the property details, we'll model real numbers in 20 minutes.