Pulling equity out of a primary residence to fund the down payment on the next investment property is one of the oldest plays in real estate. It works because primary-residence cash-out prices better than investment-property purchase — you're using cheap capital to buy an appreciating, income-producing asset.
How the mechanics work
- Cash-out refi on primary residence — up to 80% LTV conventional, 100% VA. Take the equity as cash at closing.
- Purchase investment property — use the cash as down payment. Typically 20–25% down on conventional investment purchase, or 20–25% down on DSCR.
- Two mortgages, one strategy — your primary payment goes up slightly, but the investment property generates cash flow (or depreciation-based tax benefits) that ideally offsets it.
Two ways to finance the new investment property
Conventional investment purchase: Full income documentation, counts against your DTI, up to 10 financed properties on most lenders. Best when your income is strong and DTI is comfortable.
DSCR investment purchase: Qualifies on the property's rental income alone. No personal income docs, no DTI limit, close in an LLC. Best when your DTI is tight or you already have multiple financed properties. See our DSCR loans overview.
Colorado STR markets where this works well
Telluride, Steamboat Springs, Breckenridge, Crested Butte, Vail, Aspen, Winter Park, Frisco. All have active short-term rental demand and DSCR programs that accept STR income projections via AirDNA.
Florida vacation rental markets
Orlando (Kissimmee, Celebration, Lake Nona), Destin, 30A, Panama City Beach, Naples, Fort Myers Beach, Key West, and the Keys. STR income is well-documented and DSCR-friendly.
Tax note
Interest on the cash-out portion may or may not be deductible depending on how you use the cash. Talk to a CPA. We're not tax advisors.
FAQs
Can I really use my primary-residence equity to buy a rental?
Yes — this is one of the most common ways real estate investors fund down payments. Cash out from the primary at 80% LTV, then use the proceeds as down payment (typically 20–25%) on the investment property.
Is the cash-out taxable?
No — loan proceeds are not income. However, the tax treatment of the interest on the new mortgage varies based on how you use the cash. Talk to a CPA — we're not tax advisors.
Should I DSCR the new investment property or use conventional?
Depends on your income and portfolio. Conventional requires income docs and counts against your DTI. DSCR qualifies on the new property's rental income alone — good for high-DTI files or investors buying multiple properties.
How long does the two-loan process take?
Cash-out refi closes in 21–35 days. New purchase closes in another 21–35 days. Plan on 60–90 days total from starting the refi to closing on the investment property.
Related: DSCR loans · DSCR refinance Colorado · DSCR refinance Florida · Cash-out refinance Colorado · Cash-out refinance Florida