Refinancing real estate rental property is something which can be of great benefit, if you know how to carry it out safely. Of course, nothing in finance is ever truly free, and there are fees which the lender will impose upon you. These need to be factored into any projection you make as to whether refinancing will be a good idea. This is assuming, of course, that the goal of your refinancing project is to raise more money for investing in other properties. It certainly does not need to be. There have been many property investors who would simply take this money and spend it, counting it as a tax-free reward for their effort.
If you have any ambition to build up a property portfolio which can keep giving you money for many years to come, it is best not to weaken it by taking money out in this way at the start. Refinancing for re-investment makes a lot more sense, and it should still be possible to gain a positive cash flow. It is also possible to refinance a property, and then use the proceeds to diversify and invest into other things such as stocks or bonds.
A lot depends on your personality. If you are definitely a hands-on person, with a liking for having control over the important investments in your life, you will probably want to stick with property. You control most of the variables here, and operate in an imperfect market. If something is not working, you can change it. When you invest in other financial instruments, you are extremely limited as to what you can do. If the price does not move, you can do nothing to make it move. You can develop some degree of control with disciplined trading, and by knowing how best to react in certain circumstances. The point is, though, that react is all you will be able to do.
Assuming you choose to refinance for further real estate growth, you have immediately reduced one of the biggest risks inherent in this type of investing. When you only have a limited number of properties, especially if you only have one, you are at the mercy of a sudden departure of your tenant reducing your income to zero. Diversification brings a far greater degree of safety. It does make sense to diversify with another property of a very similar type, though, so you can use the insights and knowledge you have gained from managing the first property to good effect.
Speed is crucial for refinancing to work well. You should ideally have a portfolio of properties ready to go when the money comes through, so that you can get it reinvested into property as quickly as possible. It is also a very good idea to advertise for tenants in advance, so that you can start seeing a return on your refinancing immediately. You do not want to be making the increased payments on your new financing package any longer than you need to without income coming in to cover it, and ideally not even once. If you can quickly get the rent in to cover it, refinancing could prove to be a very profitable way to go.