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Can you get a cash-out refinance on an investment property?

Opting for a cash-out refinance on an investment property can help you expand your real estate portfolio further, but there are special considerations.

Lindsay VanSomeren
March 27, 2024

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Building a small portfolio of rental properties is a time-tested American approach to growing your wealth. There are many ways to do it, but for most people, the financing is one key hurdle to clear. Real estate isn’t cheap, after all. 

Tapping into your already-existing equity via a cash-out refinance on an investment property is one of the most popular ways to secure funding for rental upgrades and even the purchase of new units. A cash-out refi on an investment property generally works the same as for your own home, however you’ll generally face tighter lending restrictions. We’ll show you exactly what to consider and how to qualify.  

What is a cash-out refinance?

Normally, when you refinance a mortgage, you’ll simply change your interest rate and/or loan term length, but everything else stays the same. A cash-out refi, on the other hand, also allows you to tweak those factors, but you’ll also borrow a larger loan amount than you need to pay off your current investment mortgage. You’ll get that extra cash back as funds that you can use for anything you want — including your next real estate venture. 

Cash-out refis can help you qualify for a lower rate and/or a smaller monthly payment, depending on your current financing setup. Even if not, however, you’ll always get some cash out — and for most investors, that’s the real draw. Refinancing your property is a key component of the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat), for example. 

Can I get a cash-out refinance on an investment property?

It is possible to get a cash-out refi on an investment property, but there are some pros and cons to consider. 


  • Deduct expenses on taxes: You may be able to deduct interest paid on a cash-out refi on your tax return, along with other business expenses such as repairs. 
  • Expand real estate portfolio: You may be able to access a significant amount of funds with a cash-out refi, enough to allow you to put a down payment on another property. 
  • Access equity you’ve already built: You won’t need to drain your cash reserves to borrow money, protecting you against vacancies or other snags. 


  • Higher interest rates: You’ll pay a higher interest rate than property owners applying for a cash-out refi on an owner-occupied single-family home. 
  • Closing costs and fees: You may have to pay certain lender-required fees, such as for appraisals, title searches, credit reports, and more. 
  • Potential for overleveraging: If home values take a downturn, you could owe more than your property is worth. Higher payments can also impede your cash flow if you run into financial problems later on. 
  • Stricter qualification requirements: Fannie Mae and Freddie Mac have special rules for rental properties held in an LLC, and you may need better credit and more equity in general to qualify.

Requirements for getting a cash-out refinance on an investment property

Lenders know that if you run into tough financial times, you’re more likely to prioritize the mortgage on your own home rather than on your rental properties. In order to compensate for that risk, most lenders will charge higher rates and have stricter eligibility requirements to ensure that borrowers are well-qualified from the start. 

Each lender sets its own requirements to qualify for a cash-out refinance on an investment property. Here’s what you can expect:

  • Credit score: 680 or higher.
  • Rental history: Some lenders will want to see cash flow reports for the past few months or years. 
  • Cash reserves: 12 or more months. 
  • Seasoning period: May need to wait six months or a year before you’re eligible to refinance after purchasing. 
  • Loan-to-value ratio (LTV): 70% or less; meaning you’ll need at least 30% equity before you’re eligible for a cash-out refinance. 
  • Business structure: Some lenders only refinance properties owned by individuals, not LLCs or other formal business structures. 
  • Debt-to-income ratio (DTI): 45% or less. 

Alternatives to a cash-out refinance on an investment property

Real estate investors may have many tools available to finance their ventures, and a cash-out refinance loan is just one option. Here are a few others to consider:

Home equity loan

Home equity loans — also known as second mortgages — allow you to secure financing via a separate loan, keeping your current mortgage in place. This can be a good option if you cannot secure a lower rate with a cash-out refi. 

Home equity loans are disbursed in a lump sum, perfect if you’re using it to buy a new property or pay an invoice from a contractor. They’re repaid over the course of five to 20 years, which may be able to help you save on long-term financing costs vs. a cash-out refi, where you may be repaying the debt for up to 30 years.   


A home equity line of credit (HELOC) works similarly to a home equity loan in that it’s a separate debt tied to your property, preserving your current mortgage. Rather than a lump sum, however, you’ll have access to a line of credit that you can draw against as you need. This can be especially useful if you’re putting sweat equity into a rental rehab, since you can pay for materials as you have time and energy to complete various home improvements. It also allows you more freedom to take advantage of spur-of-the-moment real estate purchases. 

In general, HELOCs come with variable rates that are less consistent than a home equity loan, which offers fixed rates. However, you won’t pay any interest unless you’ve requested a draw, and even then, you’ll only be required to make interest-only payments during a five- to 10-year draw period. After that, you won’t be able to borrow more funds and you’ll transition into a 10- to 20-year repayment phase. 

Home equity investment

A home equity investment (HEI) is different from a traditional loan. It works by sharing a stake in your rental property’s future equity with a company that offers you funding now. For example, Point offers up to $500,000 in upfront funds in exchange for a pre-set percentage of the property’s future appreciation. 

An HEI is typically much easier to qualify for than debt-based financing products. It also requires no monthly payments, freeing up a large portion of your rental’s monthly cash flow. You’ll make one balloon payment at the end of the HEI term length, or sooner if you sell the property or decide to pay it off early.

Good investors are aware of financing opportunities they can use to take advantage of new opportunities, whether that’s acquiring a new property or renovating a current one to provide better cash flow. Cash-out refinances on investment properties can be particularly useful if you’re swapping out a hard money loan or another type of high-cost financing. However, you have a variety of options available. To see if your investment property qualifies for an HEI from Point, complete this quick, 2-minute form.

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