Case study 6

Conservative Cash-Out Refinance for Reserves and Stability

Investor Profile

  • Property type: Single-family rental
  • Ownership: 2 properties
  • Strategy: Capital preservation and liquidity

 

Property Snapshot

  • Estimated property value: $480,000
  • Current loan balance: $200,000
  • Current LTV: 42%

 

Rental Performance

  • Gross monthly rent: $3,500
  • Operating expenses: $900
  • Net operating income (NOI): $2,600

 

Cash-Out Refinance Structure

  • New loan amount: $280,000
  • Cash-out proceeds: $80,000
  • New LTV: 58%
  • Interest rate: 6.40%
  • Monthly principal & interest: $1,751

 

Cash Flow (After Cash-Out)

  • $2,600 − $1,751 = $849 per month
  • Rent coverage ratio: 1.49x

 

Use of Funds

  • Maintained cash reserves
  • Funded capital improvements
  • Avoided high-interest short-term capital

 

Key Takeaway

Cash-out refinancing is not inherently risky. Risk comes from over-leveraging. Conservative equity access can strengthen a portfolio when cash flow remains strong.