Help Me Understand Cash Out Refinance

[Yuuj V.]

Hello BP!

Can anyone help me understand if my math/though process is correct:

I bought a rental property for $100,000 in 2018, with $25,000 down.

I got some comps from my PM recently and they are saying it can sell for $185,000.

I'm thinking about getting an appraisal done, and then refinancing 80% to pull $144,000 out. (Is this the right process?)

Is that the proper thought process? 

Getting an appraisal before going to a lender for a refinance, or should I just go to a lender to refinance and get an appraisal during the process. I can also just sell the property, hopefully for between $175,000 - $180,000 Pay back the mortgage, walk away with roughly $75,000 in profit (discounting the down payment)

Me ideal end goal would be to pull out as much cash from the new value of the property. How can I accomplish this? 

I get the BRRRR process, but something isn't 'clicking' for me to understand the refinance piece.

Who would provide the appraisal? The lender? Me? 

Any help is always appreciated!

[Will Fraser]

Hi @Yuuj V.!  You should definitely go to the lender first!  They will almost certainly not accept the appraisal since they would be required to go through certain processes for the appraisal in order to sell it to an investor (which is how most lenders operate, they make a loan and then sell it to one of the giant investors who buy loans and hold them).

Also know that you may be capped at 75% of the appraised value on the refinance.

If you already have a great interest rate and your goal is to BRRRR properties with the funds, you may consider getting a HELOC on the home to utilize some of the equity. Otherwise a cash-out refinance would give you access to the cash AND lower your rate. If you are hoping to buy another buy-and-hold property with the funds you cash out, then a full refinance may the right play.