You've built equity in your rentals, but now what?

You could do a cash-out refinance to pull out money for your next deal.

But if you do it wrong, it could wreck your cash flow and your growth.

So in this episode, I'm joined by my investor-friendly mortgage broker Brian Maddox

to break down exactly how cash-out refinances work and how to use them without putting your portfolio at risk.

Welcome to the podcast real estate investing with Coach Carson.

I'm your host Chad Carson.

You can also call me Coach Carson.

And in this show, I teach you how to use real estate investing to achieve financial freedom so you can spend your time doing more of what matters. All right. So Brian, I want to set the stage here. We have so many investors and also

homeowners who have a bunch of equity in their properties. And they're looking at this equity and

they're thinking about I want to grow. I want to be a good investor who's building more wealth.

And they keep staring at this equity in their home saying there's got to be something I can do with this equity and one tool and the financing tool belt, which you told me offline, which I didn't realize this is the case. You do a lot of cash out refinances, which is what we're going to talk about. So pulling out your equity from a property and with one specific tool, we're going to talk about called a cash out refinance. I want to talk about this, but I want to get into the vocabulary. What is a cash out refinance? Can you just kind of start really basic with that and explain it and we can dig into it more? Love it. Yes. So when we do a refinance, we're doing one of two types of refinances. One is called a rate term refinance. And that's where we literally don't put

money in your pocket at closing. We can pay off your existing debts. We can finance in your closing costs. We can pay off any mortgages. But we're not putting cash in your pocket. And when we pay off debt, it has to be debt on the house. The other type of refinance we do is a cash out refinance. Now, this sounds strange, but if you have no

mortgage on your property, it's own free and clear, it's still considered a refinance because it's not a purchase, right? In our world, it's either a purchase or refinance. So a cash out refinance is where we do put money in your pocket. And it's just that easy. If you get money in your pocket, it, it's a cash out refinance.

Got it.

So you've compared it, you call it a rate and term refinance. That's one term.

And then you have a cash not refinance. Those are our two choices if we're going to refinance. So I'm thinking like what are some situations that you see? You have a lot of clients that you work with on this. And what are some typical situations where somebody comes to you and says, Brian, I want to do a cash out refinance.

What does that typically look like?

Yeah.

So I always tell people, I got four kids and I got a lot of bills. And I need to save for tons of colleges, right? And so to me, equity in a home is unemployed benjamin's. It's not out in the workforce making new money to bring back to you. So a cash out refinance for a lot of investors, it's about freeing those Benjamins and getting them employed, getting them off of welfare, sitting around looking at each other in your house, and putting them in the workforce and redeploying that money. That might be another house that you're purchasing. It might be a business opportunity. It's got to be, if you're doing it on an investment property, it has to be a business purpose. When you're doing it on your primary residence,

it might be for future investment opportunities or it might be for debt consolidation. It might

be that I have a bunch of credit cards. Americans have $1.1 trillion in credit card debt right now.

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