Help: Refinance example and explanation

[Keith Clean]

Hi guys,

I live in the Netherlands but was born in the US. I'm very interested to invest in the US real estate market. So the first step is to learn and read everything I can about real estate investing and that's exactly what I'm doing. So it's safe to say that I'm not an expert at all like you guys, but I'm really eager to learn from you all. 

My question is about refinancing. I'm looking to buy my first rental investment property in 2020 and my goal is to buy an investment property every year. I think that the key to achieve this goal is through refinancing. 

Example: Every year I got 22K cash available to buy an investment property. Next year I want to buy a house for about 50K in cash. So if I'm buying this house in cash for about 50K and start renting it out. Can I than go to a bank and ask for a refinance and get 75% (37.5K) of that 50K, and buy another property with that 75% and the 22K in cash I got available? And rinse and repeat these steps every year?

I really like to learn everything about refinancing, because I think this will be the key for me to be able to buy one house every year.

Looking forward to the replies and thanks in advance!

[Anthony Dooley]

I don't know of any bank that will make a loan for less than $50,000. So if your house is valued at $50K, it would only qualify for $37,500. No loan. If you had two or more houses and refinanced the portfolio, it would be more attractive to a lender. Also, you would usually need to own the house for at least 6 months before they would refinance. If you improve the value of the property, you would be able to borrow more against it, of course. The smarter way to do it would be to buy the first 3 with cash, free and clear. Refinancing kills your monthly cash flow, but owning 3 rentals free and clear will allow you to save money much faster and thus buy more cash properties. I choose dollars over percentages.