BRRRR Method Confusion!

[Jonathan Edmund]

So I have lined up a home that I was originally going to flip but I think may be better for the BRRRR Method. Or at least I thought so.

The homes ARV is roughly $250,000 but I can get it for $170,000. It needs $37,000 worth of work according to my contractor. That comes out to $207,000 total cost for home and reno. I would use hard money to get the property which would be 3 points up front, 450 appraisal, 695 lending fee and they 12% interest only loan for one year. I would re-fi after 6. That would be $7,951 in interest only payments before re-fi.

So I would be out of pocket $50,496 and have a $165,600 balance to pay off when I re-fi. So that would be $216,096 that I'm out. When I re-fi, I can only finance $175,000 (70%) of appraised value. But really since I paid almost 51k up front, I'm getting 10k back so I'm still out 40k. This isn't correct as this method is supposed to pull all of my cash out correct?

So is my problem that I'm looking at a home that needs too much work and am over paying? I figured for a home that I'd have that much equity in, I'd be doing ok until I really look at the numbers. I used the calculator for BRRRR method but I think it assumes I'm paying all of the repair costs out of pocket and messes up my numbers and thinks I'm coming out of pocket like 80,000.

I just want to figure out where I'm going wrong so I can correctly implement this plan in the future when the right deal arises.