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>If you rent, cash out refi, rinse and repeat.

Can you expand on that point?

If they rent it shouldnt they just sit around and collect payments?

Also, isn't this all highly reliant on location?

Sure. You buy a distressed house with leverage. Improve it, which if done in a smart way should raise the value more than what you spend on renovations. You can then go and refinance at the new appraised value, taking cash out. You take that cash and buy another property. Do this over and over and eventually you have a portfolio of properties and consistent cashflow from your rent roll. Granted this will likely take longer than a few months. You could probably do one flip in that timeframe, however.

Cash out refi allows you to use your rental as leverage for a down payment on the new house.

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