Cash out refinance - Texas

[Matthew Sutton]

Okay, so my business partner is stuck on a subject, and I need some help explaining it. Looking at a property at 100K that needs 30K worth of repairs for an ARV of 150K. We plan on renting it out for around $1,350/mo. The property appears to clear about $300/mo in cash flow. Help me explain the value of purchasing the property knowing it will take 10 years to get the initial investment of 30K back out of it if we refinance at 70% of ARV at around 105K.

I know we would have about 20K worth of equity and the initial investment would be paid off in about 10 years.  The note would go down from the 105K also and create more equity.

1.  Is there anything I am missing in showing the logic behind investing in the property and leaving the money in?

2.  Is there a way in Texas to get all of the money back out?  The initial investment and the rehab.  

[Josh Mitchell]

@Matthew Sutton if you purchase for $100, put 20% down ($20,000) and then $30 into it, so you would be at $50 total ($25 from each party) and the property appraises at $150, you should be able to c/o refinance up to 75% which would put you at $112.5 loan amount. Being that your mortgage was $80, that is a difference of $42.5 ($21,250 each) from your initial $25 you each put down. With $300/mo. profit, you would get ~$1,500 each annually (assuming you already budgeted for cap ex, management, etc.), and make up your initial investment in 2 years, not to mention the equity gained during that time as well.