Cash out refinance tax consequences?

[Jack B.]

Let's say I take the money out and reinvest in another mortgaged property as a rental. I can now deduct the portion of interest expense related to the Cash out refinance as an expense for the NEW property (rather than the old) on schedule E?

Let's say I take the money and I buy a paid in cash rental property. Since I reinvested the money into a rental, can I still deduct the interest related to the cash out refinance on the original rental or no? From what I've read it sounds like a no?

The reason I'm considering doing this is to tap the equity to buy paid off cash flow properties, while leaving the equity properties to keep growing over time, taping the equity from them and my job to buy a hand full of cash flow properties every few years.

Equity investing has been great, but only because of leverage and the market being with me. It doesn't replace my salary, whereas cash flow properties purchased by the firstfull every few years would.