How much cash can you take out of a rental?
The most you can take out is the appraised value times the lender's maximum loan-to-value, minus what you still owe and the closing costs.
| Property | Maximum LTV | Cash out in the example |
|---|---|---|
| 1 unit | 75% | $125,250 |
| 2–4 units | 70% | $104,000 |
Those limits come from Fannie Mae's eligibility matrix; purchases of the same property allow 85% and 75%.[2] The lender applies the LTV to the current appraised value, not to your own estimate.[1] Fannie Mae also prices cash-out loans on investment property with loan-level price adjustments that rise with LTV, from 1.125% to 3.375% of the loan up to 80% LTV.[4]
Eligibility rules for a cash-out refinance
- Six months on title. At least one borrower must have been on title for six months before the new loan is disbursed, under both Fannie Mae's and Freddie Mac's guides.[1][3]
- A seasoned first mortgage. A first mortgage being paid off through a cash-out refinance must generally be at least 12 months old.[1][3]
- Bought for cash recently? Fannie Mae's delayed-financing exception allows a refinance within six months of a cash purchase, capped at the documented purchase investment plus financed closing costs, prepaid fees and points.[1] The BRRRR calculator covers that case.
What the cash really costs
The cost of cash from a refinance is not just the new rate: it is the change in the whole payment. In the example, $125,250 of cash raises the yearly payments by $13,688, which is 10.93% of the cash received every year, higher than the 7.125% note rate, because the old 3.75% loan is replaced as well.
| Before | After | |
|---|---|---|
| Loan balance | $186,000 | $318,750 |
| Monthly principal and interest | $1,007 | $2,147 |
| Monthly cash flow (NOI − payment) | $1,293 | $153 |
| Debt service coverage ratio | 2.28× | 1.07× |
| Loan-to-value | 43.8% | 75% |
Replacing a low-rate loan to free equity is expensive. Compare it with the return you expect on the cash: if you plan to buy another rental, run that deal on the rental property calculator and check that its cash-on-cash return beats the cost of the cash.
Will the rent still cover the loan?
A bigger loan lowers the debt service coverage ratio. Here it falls from 2.28× to 1.07×, below the 1.25× that agency multifamily lenders test for.[5] On a 1–4 unit rental, a DSCR loan lender will test rent ÷ PITIA instead. Check both with the DSCR calculator before you apply. In the example, rent of $3,400 against a new PITIA of $2,757 is 1.23×; it would take $3,447 of rent to reach 1.25×.
More debt, more riskA cash-out refinance increases what you owe. If rents fall or the property loses value, you could owe more than the property is worth.[6]
Frequently asked questions
Can you do a cash-out refinance on a rental property?
Yes. Agency guidelines allow it on investment property after six months on title, up to 75% of the appraised value for one unit and 70% for two to four units.
How much equity do I need for a cash-out refinance on a rental?
Enough that the new loan, at the lender's maximum LTV, exceeds what you owe plus closing costs. At 75% LTV you keep at least 25% equity after the refinance.
How soon can I do a cash-out refinance on an investment property?
Generally after six months on title. A cash purchase can use the delayed-financing exception sooner, with a smaller loan limit.
Is a cash-out refinance on a rental worth it?
Only if what you do with the cash earns more than the extra payments cost. The worksheet shows that cost as a percentage of the cash you take out.