Cash out refi before listing?

I’m sure most here refinance after they rehab a house before they put it up for sale, but I would figure most are rate and term.

Does anyone cash out refi, and pull some cash out before they list for sale?

Obviously you dont’ want to cash out at a high LTV, but you could easily pull some cash out, right? And any cash you take out would be tax free as well.

Any thoughts?

Cash you take would still be taxable. I see no reason to refi unless you have a very high interest rate and expect to hold awhile until you close

Doing a cash out refi just before selling the property makes no sense unless you are strapped for cash. Also, the cash out financing has no implication on the taxable gain you may have when you sell the property. Proceeds from a loan are not taxable but when you sell the property your gain is the difference between the sale price and your cost basis.

I’m confused here please help me understand…

If I buy a house for 100k and refinance it and pull out 10k cash…then my current loan would be at $110k.

So if I sell it for $130k, I profit 20k from the sale.

In this instance, both the 20k (from sale) and the 10k (from refi) get taxed?

That doesn’t seem to make sense.

No, the 10K would not be taxed… you are paying int. on it.

If you buy a house and have 100K of expenses in it and you refinance it for 110K and take 10K of cash out, and then sell the house for 130K, you pay taxes on 30K. Please see your ax advisor for additional clarification but other than the deductions you can take for any interest you pay, you are taxed on the 30K you sell it for above and beyond the 100K you have in it.

No, the 10K would not be taxed.. you are paying int. on it.


Again, I don’t know how you can claim to be an experienced investor when you clearly don’t even understand the basics.


No, your profit is $30k (assuming there’s no other expenses, which of course there would be but you don’t have anything listed so we’ll just say you had no other transactions on this house)…

When you say “I profit $20k from the sale”, you actually are just seeing $20k of the total $30k profit since you’ve already taken out $10k in cash earlier…

Your profit for tax is your selling proceeds (the sales price less selling expenses - realtor, deed transfer, prorated property taxes, etc.) minus your cost basis (purchase price plus rehab expenses, etc.)…