Understanding refinancing How does BRRRR work?

[Trent Willey]

Sorry noob question regarding refinancing. I searched the "browse forums" and did not find an answer. I'm not understanding how the refinance works at maintaining cash flow. What I mean by that is for example say a property is purchased and appraised for $100K. Value is added and now appraised for $150K. Say 20% or $20K was needed to initially purchase the property and $80K was financed at 4%. $10K was needed for improvements bringing a total of $30K of your own money invested into the property. The mortgage for $100K with 20% down at 4% interest is $631.93. Given the home will rent for $1000/month (passes 1% rule), insurance is $1500/yr, taxes are $1500/yr, plus $1500/yr for"other expenses". Monthly expenses including mortgage would be $1006.93 which would put the property into a negative cash flow by $6.93. Given LTV refinance at 80% which equates to $120K. After seasoning a refinance of the property is obtained and all $120K is taken out during the refinance. Now here is my question....when the property is refinanced will the monthly mortgage now be based on the amount that was removed from the new appraisal 80% LTV amount that being $120K? Lets say in this example all $120K was removed. The old mortgage amount of $631.93 is not retained, correct? The mortgage is now based on $120K which would further increase the monthly mortgage payment and thus place this example into further negative cash flow due to the larger monthly mortgage? I can't figure out why BRRRR would work unless you could purchase this property for significantly less than $100K or is that how BRRRR does work? Thank you for any assistance you can provide my confused mind.