How Are You Using Refinancing to Scale?

Question

I’ve been talking with investors who view refinancing not just as a way to lower rates, but as a tool to free up capital for their next deals.

Some describe it as a “snowball effect,” where one refinance funds two or three more investments.

I’m curious — for those of you doing this, how do you balance pulling equity out with keeping properties cash-flow positive?

Would love to hear your strategies on using refinancing to grow without overleveraging.

Arman Ahmed · Answer

@Kelly Schroeder

Kelly, love this question. I’ve seen refinancing used really effectively as a scaling tool, but the key is balance. Some investors pull just enough equity to fund the next deal while keeping DSCR strong so cash flow isn’t wiped out. In my Midwest projects, I’ve noticed it works best when you buy slightly under value, force appreciation with renovations, and then refinance at the higher value—you’re essentially recycling trapped equity without stressing monthly numbers. It’s definitely a snowball effect, but only if each property still stands solid on its own.

John Morgan · Answer

@Kelly Schroeder

I’ve bought 14 rentals from 5 cash out refis. I’m a fan of harvesting the equity to scale up. It’s a good way to buy houses with zero out of pocket if you don’t have the cash sitting around in savings to scale up. This has been my strategy to scale up and ramp up my cash flow. Do they cash flow much right away after I do the cash outs? No. Some only cash flow $100-$200/month. Annual rent increases make them do ok after about 2 or 3 years. But the new ones I get (for free basically) do well and my tenants are paying off all these mortgages. I’ve barely spent any of my own $ to buy rentals and have been able to scale up to 29 rentals by using equity, 401k loans, random consumer lines of credit from banks and 0% interest for a year credit card loans. I never really had much $ to invest in real estate, so I recycled equity to scale up and use OPM to buy more and more. Then pay off all the short term loans with the mailbox money.

Chris Howell · Answer

@Kelly Schroeder

I look at my single-family rentals as one portfolio with combined monthly income rather than evaluating them individually. Right now, I’m planning to refinance a portion of my free-and-clear houses and use that equity to acquire a multifamily property that needs rehab.

My mindset is simple: yes, my monthly debt service will increase by $4k–$5k, but in return I can pick up an asset where I can force $500k+ in appreciation and add $7k–$8k per month in income once stabilized. That means my net worth grows, my gross income climbs, and my overall portfolio cash flow improves.

For me, refinancing is less about squeezing the last bit of cash flow from each property, and more about using existing equity to scale into larger deals that create outsized returns. The key is finding the right multifamily project where the numbers pencil out and the rehab upside is clear.

Nadeem Alamgir · Answer

Hey Kelly refi can definitely snowball growth but making sure the property still cash flows after the new payment is important. I usually see investors pull just enough to fund the next deal, not max it out. As long as the numbers still work with a buffer, it’s a solid way to scale without getting overleveraged.

Greg Kasmer · Answer

@Kelly Schroeder - Pulling out equity from existing properties can help one grow your portfolio. If you refinance and say, you get a 7% interest rate on that money from the refinance as long as you can garner a higher rate of return elsewhere with that money (cash flow, appreciation, etc..) in a new investment you'll come out positive from a portfolio perspective. You are correct that your new loan payment will likely be higher and cash flow less, but you're building a larger portfolio overtime that will reach the benefits of real estate in the long term with appreciation, principle pay down, and cash flow. Good Luck!

Carini Rochester · Answer

I refinanced a house (single family, long-term rental) and used the money to make a down payment on a small multi-family. The rent received each month on the single family was $1500. The rents for the multi-family was $3000. The total rent coming in on the two properties was $4500. If one were to just look at the original single family you could say that this move destroyed the cash flow on that property at first (yearly rent increases have eased that.) But the totals for the two properties looks very good. The $4500 easily covers both mortgages and keeps up with regular repairs and maintenance, etc. In addition, I now have $400,000 worth of property that has been appreciating nicely instead of only the one $150,000 property. The argument for refinancing is not as strong as it was due to the higher interest rates now. But there are certainly cases where it can be the right move. Selling and doing a 1031 exchange can be done instead refinancing. Look at all your options.

How Are You Using Refinancing to Scale?

Most Popular Reply