And then can we refinance it to pay off that mortgage or what other ways can we go about it?

Why sell your property to buy another property at market value to put 30+% down, when you can just refinance your property to get a lower interest rate? 

How can I put myself in a better position to get approved for a cash-out refinance?

My lender requires a period of time prior to doing a cash out refinance.

That way, you utilize your equity when you want it and not have cash just sitting there in a bank via a refinance. 

@Lesleigh S.Depends on your current loan situation, but one of the more common ways to do this is to transfer the property into your personal name if you plan to refinance. 

In a few years you can probably refinance to a lower monthly payment, although note that your housing costs are now pretty much static while your income will continue to grow -- vs. renting from someone who can increase prices at the end of your lease.

My thinking was to refinance, without pulling out the equity, to a conventional loan so I can rent the house out in the future.

If so, do they get paid back their loan when I refinance?

@Tim HermanCant refinance if I cash flow?