Pay down mortgage to then cash out refinance?

[Dima R.]

In Long-Distance Real Estate Investing, Greene discusses amortization and the benefits of paying down loans quickly. At the end of Chapter 4, he writes, "...why not reinvest that income into new properties? Pay down your loans faster, refinance them, and then reinvest that chunk of tax-free income into a new multifamily property or several single-family properties?"

Sorry if this is painfully obvious to toehrs - I'm just starting out - but are loans generated by cash out refinancing typically at much lower rates than the initial conventional or commercial loans through which rental properties are typically purchased? And if not, what's the benefit of aggressively paying down a mortgage, only to then cash out refinance? Wouldn't it be the same to pay the mortgage down at a slow rate and then use the excess funds to invest in new property?

Thanks.

[Joe Villeneuve]

Paying down a mortgage using your free money, your cash flow, costs you money.  The only cost to you as a rental property owner is what comes out of your pocket.  When you use the rent money to pay the mortgage, as scheduled, you're letting the tenant buy the property for you.  When you use your money, and this includes your cash flow, you're helping your tenant buy your property.  

Then, to make matters worse, you then decide that you want your money back (REFI), but in order to get it back, you have to buy it from the bank (interest).

Why?

Paying down the mortgage on your own home is good.  It saves you money.

Paying down the mortgage of a rental property (using your money) is bad...and just adding to the cost of that property.