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.