Cash-out refinancing for short-term rental investments

[Archimedes Jao]

What is cash-out refinancing? How does it work? I don't really understand the math. Do I rehab a short-term rental and then get "cash-out" for the difference between old and new value? If so, I was hoping to do this and then use the "cash" to invest in the next STR. Thank you.

[Leslie Anne Morris]

I’ve done this recently. It will depend on how long you’ve held the property and if you’ve done any work. Essentially the math is dependent on how much cash out your lender will lend. In most cases, they will lend up to 75% of the value. So if your property is worth $400k you take 75% of that and then subtract what you owe on the existing mortgage and the remainder is the ‘cash out’. (400,000 x .75 = x - your existing loan balance = cash out)