If you're trying to grow as a rental investor, eventually you run out of money, and then you can't

buy any more rental properties. So one strategy to solve that is called a cash-out refinance,

where you refinance the property you already own, you pull out the cash, and you use that cash to buy

your next rental property. But recently, I asked John Schaub, who's been a rental investor for over

50 years and wrote the classic book,

Building Wealth, One House at a Time? Is this a good idea? And in this special Ask Coach edition of the podcast, I wanted to share John's answer with you. Now let's get to John's

answer. Well, if you had another property that you knew you could buy in a terrific deal, you know,

if you can go out, buy a $400,000 house for $300,000, yeah, then you scramble to find the money any way you can't.

It's a terrific deal.

But what I see happening when people refinance a house

is, first of all, they're paying off sometimes a good loan and taking out a loan that's not as

good, right? So they're going from a low, if you went from a high interest rate loan to a low

interest rate loan, that would be an argument for doing this. So if you had a 10% interest rate

loan and you get a 5% interest rate loan, sure, if you refinancing makes sense.

And I have refinanced properties, but when I refinance the properties, I'm generally doing it to increase my cash flow.

So if you took, for example, if you take an old loan that has a big principal payment, maybe the principal payment is $500 a month, and you can refinance

that with a 30-year loan and your principal payment is only $100 a month. Your cash flow would jump up

$400 a month even if it had the same interest rate. So you look at all these numbers and study it

before you do it. But when you refinance a loan, you have closing costs of course.

The day you refinancing your net worth is actually dropped because you have cash in your hand,

but you paid maybe $5,000 refinance this loan.

So you have to make sure that the new loan that you're putting on this house is not a high-risk loan.

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