BRRR and Selling Question - Starting Out

[Andrew Esposito]

So, a friend and I are about to take our first dip into real estate investing.  I have searched for an answer to this, but can't seem to locate anything on point.  Also, this is my first post so if this isn't appropriate, I apologize in advance.  The details of our situation:

Property purchase price - $135,000

Rehab Estimate - $50,000

ARV - $300,000 (75% of $300,000 = $225,000

Rental Estimate - $2,500

So on a typical flip, we are in for $185,000, sell for $300,000.  Pay taxes on the difference (for simplicity I am not taking into account fees, etc.).  Lets assume not reinvesting in a 1031 exchange.  $115,000 Profit taxed at individual rate for short term capital gain (35%) and i am not going to go into S-Corp taxation status for simplicity.  In total on a sale of $300,000, the total net take home would be $75,750 ($300,000 - $185,000 - $40,250(35%)).

Now what if BRRR is used with a sale, rather than repeat? The ARV is $300,000. The cash-out would be $40,000 ($225,000 - $185,000). The new loan is $225,000. Sell property for $300,000. Profit based off of the new loan is $75,000. That $75,000 is taxed the same as (35%), leaving you with $48,750. You pocketed $40,000 on the cash out (no tax penalty) and you pocketed $48,750 from the sale. This brings the total profit to $88,750, which is $13,000 more than standard flip. I understand that the refinance portion will come with additional closing costs that will reduce that number, but it still appears that you would make over 10% more if you included the refinance/cash-out here.

Am I missing something?  Are there taxes that would be required to be paid in the cash-out portion that I am not aware of?  Any help would be greatly appreciated.