Deducting interest on cash out deal

[David V.]

I think I may have made a big rookie mistake. I recently purchased an investment property (a rental) for cash with the expectation of doing a cash out shortly thereafter. Couple months later I did the cash out. I assumed that I could deduct the expense on the cash out just like I could if I purchased with financing. However, I have read in a few places that I cannot deduct the interest in thus unless the loan was used for improvements. As such, I think I am out thousands of dollars on interest expense deductions. Is this true?

Thanks