Mortgage Loan with Refinance in A Single Step?

[Richard Davis]

I have an opportunity to buy some investment properties (studio condos) at well below the price for which they will appraise. I may be able to get a sales price of $80k on a condo that will appraise for $120k.

This would give me $40k ($120k - $80k) of 'instant equity.' That's 33% of the appraised value ($120k), which puts me above the 70% LTV mark the bank requires for refinancing an investment property. So I could buy the property in question with a 20% down payment on a conventional loan, and then wait 7 months and turn around and refinance the property with the very same bank at 70% LTV.

The thing is, though, the bank knows all this at the time of closing. They know that, on closing, I will already have 33% instant equity in the property. So will the bank let me, somehow, in effect, do both steps at once: close on the deal and 'refinance' (effectively) with the bank at 70% LTV? This would save me 7 months of waiting, and I'd get have to pay closing costs a single time instead of paying closing costs once and then paying refinancing costs as well 7 months later.

Another way to ask the same question: If the difference between the appraised price and the sales price ensures that, sans down payment, I will already have 30%+ of equity at the time of closing, will the bank somehow run the transaction, on the basis of this equity, without requiring a down payment from me at all?

Seems like it ought to work. But not sure it will. Thanks in advance!