Brokers can unlock trapped equity as falling rates fuel investor demand
Real estate investors are always looking for the next investment opportunity or trend in the industry that can lead to a surge in capital and keep their portfolio and bottom line in a healthy place. In real estate, finding certain trends can be harder to spot than others, but brokers in the industry find themselves in a unique position where they can perform research, provide insight, and offer suggestions to their investor clients.
In 2026, it looks like that will arrive in the form of the cash-out refinance, a savvy tactic for an investor to get the most out of their portfolio if expanding and buying more properties is proving difficult. Investors can lose out on properties for several different reasons such as disorganization of documents, expensive down payment, or the competition simply overpaying for the property. With this in mind, the cash-out refinance becomes much more appealing from an investor’s perspective.
The cash-out refinance is a mortgage refinancing option that replaces an existing loan with a new, larger mortgage. This allows investors to convert a portion of their property’s equity into a lump sum of cash.
The key here is that the new loan covers the remaining balance of the old mortgage plus additional funds, which the investor can now use at their discretion, but most will choose to use this money as a down payment to secure another investment property for their portfolio.
While the main component of a successful cash-out refinance revolves around the cash left over from the original payoff, another driving force for investors to be enticed by the strategy is a better interest rate.
It’s no secret that the interest rates have been moving in the wrong direction for consumers over the past 24 months. However, recent trends and rate forecasts are predicting a dip to start the year and throughout 2026 rates should continue to slowly decline. As it currently stands, there should be a large contingency of real estate investors that have loans with an interest rate in the 7s or 8s that can now be refinanced into a loan that could be in the 5s.
Brokers should be tapped into market fluctuations and what that does to interest rates as a result. This is the perfect time to reach out to investor contacts and see if this strategy can help alleviate the pressure of recent limitations placed on investors due to challenging market conditions.
Investor profiles interested in cash-out refinance
One of the prerequisites for a broker to cash in on the cash-out refinance with their investor clients is identifying the right candidates for this type of loan. Although it is a lucrative strategy for both broker and investor, not every investor is in a position to execute this strategy.
Experience should always be a key component of an investor’s profile when looking to do the cash-out refinance. There’s a good chance that an experienced investor has already completed a cash-out refinance, so revisiting this strategy could be appropriate. In this scenario, the onus is on the broker to find the right loan. This is due to the fact that if an investor has already completed a loan like this, they are less reliant on the broker to help them. However, if a broker is able to track down a few quotes from different lenders and can get their client a number of appealing options, the broker is back in the driver’s seat of the broker-investor partnership.
Brokers should also consider the cash-out refinance conversation if they know their client has multiple properties in multiple different cities or states. With an array of properties and locations, the likelihood of a cash-out refinance working for one or a few of them increases. Not all properties or markets are primed for a cash out, however; if an investor has 6-8 properties in their portfolio, one or two may fit the bill. The key factors to keep in mind for the investor is what their current interest rate on the loan is versus the interest rates available and determining how much the investor still owes on the initial loan, otherwise referred to as the payoff. Investors aren’t going to go through this process unless they are certain of the benefits. If a broker can provide specific numbers such as a much lower interest rate (1-2 points) and cash out value in the range of $50-100k, an investors’ interest will be piqued.
Investors actively looking for more properties also fit the profile of a borrower that could benefit from the cash-out refinance. Brokers will need to express how much easier it could potentially be to secure more properties if the investor considers the cash-out refinance strategy. With a little more money in their pocket, an investor can be confident and aggressive when pursuing their next investment opportunity. There is a fine line between an aggressive bid and overpaying, but if the numbers make sense and they are not draining their cash reserves, it could very much be worth it to acquire that next property.
Broker benefits
While the investor benefits and use cases should be the most important thing to consider for brokers, there are a few positive aspects worth discussing. This can offer a little more context as to why a broker should be reaching out to their investor clients about whether their portfolio could use the injection of capital a cash-out refinance can provide.
Aside from commission, the increased credibility a broker can get from their investor clients is a valuable that can’t be quantified. One of the biggest hurdles a broker can face is finding repeat business and building a rapport with their clients. Introducing or reminding a client about the possibilities a cash-out refinance can offer is a way to establish trust and an understanding that a broker is willing to do more than just the bare minimum to earn commission.
This practice can also lead to referral business for a broker. A successful investor will happily tell their story of success and how a broker played an integral role in it. Referrals can change a broker’s trajectory in the industry, so not always relying on instant gratification or results as a measurement of success is important. A successful cash out in February may not lead to a referral until November or December, so brokers must always keep that in mind and stay the course regardless of the ups and downs the industry consistently presents.
Calling all cash outs
The last piece of the puzzle is a broker’s proactiveness. The time is right to either plant the seed or have the conversation about a cash-out refinance and what the drop in interest rates means for an investor in 2026. The next call can be the best call for brokers in the industry, and matching timing and planning is paramount for connecting with investors.
This article was provided by RCN Capital
