203K Load & Equity

[Joshua White]

As suggested by many of the seasoned BP members, today I took an agent friend out to lunch today to talk strategy, markets, etc. She was an investor at one point as well so she was able to speak directly to all of my questions and ideas. She mentioned 203K loans which intrigued me and seemed like a great way to finance rehabs and improvements. 

My question is related to the equity in the home after a 203k is used. By using that type of loan, are you, in a sense, pulling out all of the equity from the home right from the start ? Maybe Im looking at this incorrectly, however I would think that if a mortgage was taken out on the subject-to-value of the home, there will be no  built in equity. Is that correct ?