What to be aware of when refinancing a rental property?

[Danny Annibale]

Hi guys,

I recently purchased a home out of foreclosure with a convention loan, rehabbed it and rented it out at a good market rent. I'm making a little bit of cash flow now, but I'd like to refinance the house based on it's post-rehab value to get as much of my initial capital out as I can.

I was wondering if there are any downsides to refinancing, specifically do I have to pay taxes on the cash I pull out of the house? If so is there a way to defer those taxes? Is there anything else I need to look out for?

In case it helps:

Original Purchase Price: $136,000

Original Loan: $102,000 (75%)

Original Down Payment: $34,000 (25%)

Rehab + Closing/Legal Costs + Misc: $30,000

Post-Rehab Appraised Value: $200,000

Thank you!!

[Jerry Padilla]

@Danny Annibale

I did cash out refinances on all my properties, and no I didn't have to pay taxes on the money I pulled out...... Actually I wrote off the new mortgage interest and the costs to do the refinances. 

Cash out refinancing is a great way to leverage your property to purchase more. Is it a SFR or a MFR investment property?

You can cash out 75% LTV on a SFR

& a 70% LTV on a MFR