What Makes You Consider Refinancing?

Question

For investors with equity in an investment property, what usually makes a refinance worth exploring?

Is it:

• Accessing equity
• Restructuring debt
• Funding another property
• Creating liquidity
• Financing improvements

Accessing equity

Restructuring debt

Funding another property

Creating liquidity

Financing improvements

What typically triggers the decision for you?

Ashish Acharya · Answer

Linda, I think the trigger should be less about simply having equity available and more about what the refinance accomplishes. If the refinance allows you to recover capital, fund another property, improve the debt structure, or complete a value-add project, I’d compare the benefit against the new payment, closing costs, prepayment penalties, and the amount of equity that remains tied up.

I’d also look at the return on equity before and after the refinance. A property can have a lot of equity but relatively weak cash flow on that equity. If refinancing lets you redeploy some of that capital into another investment while the original property still has healthy cash flow and debt coverage, that can change the portfolio economics. The downside is that refinancing can also increase leverage and reduce your monthly margin. I’d stress-test the new payment rather than assuming the property will continue performing exactly as projected.

For me, the best refinance is one that has a clear purpose and improves the overall portfolio, not simply one that makes cash available. Happy to connect!

Divin Kanyama · Answer

@Linda Murray A refinance is worth exploring when the equity can be redeployed in a way that strengthens the overall portfolio—not simply because it is available. That may mean replacing expensive or short-term debt, funding income-producing improvements, creating a prudent liquidity reserve, or financing another well-underwritten acquisition.
The key is whether the benefit exceeds the full cost, including the new interest rate, fees, prepayment penalties, higher debt service, and reduced cash flow. The property should also be stress-tested using realistic rents, expenses, and vacancy assumptions before adding leverage.
The usual trigger is a clear use for the proceeds and a measurable improvement in the investor’s position. If the refinance creates flexibility without making the portfolio fragile, it may be worthwhile. If it only extracts cash without a disciplined plan, leaving the equity in place may be the better decision.

Carl Millsap · Answer

@Linda Murray funding another property is 90% of my refinance triggers. The other 10% would be improving the financials i.e. lower interest rate opportunity then I just park the equity I pull out until another deal comes along.

What Makes You Consider Refinancing?

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