I’m currently refinancing a portfolio of 16 rental properties. My existing rate is 4.5%, and the new rate will be 6.5%. So why refinance now? Two reasons:

1. My 5/1 ARM is expiring. I’ve got about a year left on the note, and I don’t want to gamble on where rates will be next year.

2. I want to lock in my equity today. Refinancing now allows me to maximize my cash-out while values are strong. Even if the market cools over the next several months, my rents still easily cover the debt service.

If you’re wondering how I can raise my rate by two points and still cash flow, here’s the answer: rents exploded. Four years ago, our average rent was $900 per door. Today it’s $1,300—an increase of 31%. Those higher rents more than offset the increased interest rate.

From this refinance, we’ll be pulling out roughly $275,000—completely tax-free money. That cash will be used to pay off two of our short-term rentals:

Paying Off Properties With Cash-Out Funds

Property #1

• Gross annual income: $33,000

• P&I savings: $7,443.24

Property #2

• Gross annual income: $31,000

• P&I savings: $7,875.72

Total yearly savings: $15,318.96

Paying Off Another Portfolio Loan

I’m also eliminating a second portfolio loan that originally covered nine rentals. Over the past year, we sold six and used the net proceeds (after taxes) to pay off the remaining three properties:

Property #1 (STR)

• Annual gross income: $40,000

• P&I savings: $9,171.24

Property #2 (STR)

• Annual gross income: $35,000

• P&I savings: $9,171.24

Property #3 (LTR)

• Section 8 rental: $15,600/year

• P&I savings: $4,571.28

Total yearly savings: $22,913.76

Between all five properties, that’s a total of $38,232.72 per year in freed-up cash flow—money that goes right back into the business.

Why Pay Off Properties Instead of Buying More?

Because at some point, you need free and clear properties in your portfolio. They dramatically increase cash flow and create powerful leverage options.

Instead of using the cash-out to buy more houses directly, I can cross-collateralize these free and clear properties to obtain a $2M+ line of credit. With that line, I can pick up more deals using the BRRRR strategy—without paying hard money rates or fees.

And, it gives me an edge over other investors. Paying cash eliminates hard money oversight, leverages my buying power to get a better price and gives me the ability to close faster in as little as 7 days.

This is how you scale intelligently.

This is how you protect cash flow.

And this is how you build long-term wealth.

That, my friends, is how you substantially scale faster and grow your portfolio.