BRRRR refinance quick question

[Austin Carlisle]

Hi all!

New investor here looking to do a first time BRRRR in metro Detroit. I just had a quick question in regards to the refinance portion of the BRRRR process.

I have a potential property that I'm looking at getting that doesn't require much rehab (just appliances) and the ARV would = the sale price.

If i do a conventional 30yr mortgage on this property with 20% down ($100,000 house), rehab it (appliances only so ARV approx equates to sale price), rent it for the bank's seasoning period then go to refinance it. Assuming the cash out refi LTV is 75% would I get $75,000 or $15,000 (my true equity stake in the house)?

Sorry if this is a dumb question, but it would be interesting to find out for me!  Thank you! 

[Brian Jurvelin]

@Austin Carlisle You may have moved on from the question already but wanted to weigh in to make sure it was clear why the scenario you mentioned doesn't work. Since you did conventional financing up front (20% down on a $100K house) you've now got a mortgage on that house for $80K. If you refinance, you won't get $75K in cash, that money would go towards paying down the first mortgage. So in this scenario, you'd end up with $0 in cash, $5K on your first loan and $75K on your second loan. So you're no better off than before, but have all the downsides Mike mentioned in his post.