Why ever sell if you can do cash out refi several times over 30 years

[Rav Ram]

Hello Fellow Investors (Warning: this somewhat advanced but could be genius with your feedback, so be patient)

I have been giving this strategy a lot of thought, and would like everyone's feedback. After selling 2 of my rentals because "i hated my tenants," I realized that i really didn't make much after: 1) having to repair the house again after the tenant moved out and 2) paying concessions and closing costs; 3) depreciatin recapture.. I then began to think of a way for it to make sense...maybe as much as sense as 20-30% flipping.

So here is the strategy with an example: Buy all cash at $85K (get most discount), fix for $15K. ARV is $130K. This should be rented for $1,000+. After 6 mos-1 year (sufficient seasoning), pull the money out with either Fannie Mae financing or a local lender (4-6%). They will give you 75-80% of value after seasoning period (or more), which is $100-104K. Remember, you are in this property for $100K to begin with, and after 1 year you get your money back, you still have 30K of equity in the house, and you are at least cash flowing positive (this must be the case with all loan/taxes/insurance/management payments). Ten years go by, and you own the house again because the loan is paid down (give or take 5 years really depending on market).

Then you go to refinance the house again (not sell, refinance) and can pull another $100K or more (if property appreciated) out of the house. Wait a a minute... You pull out $100K and you pay no tax on the $100K because it's a loan not a sale. So, every 10-15 years you can pull out $100K on this house and not pay tax. So, you do this with 10 houses and you're pulling out a lot of cash over the years all tax free. It's like looking at each house you buy as 4 houses you just made money on (over a 40-60 year span, then to ur kids).

(items not considered:1) repairs over the years after tenants leave. 2)If you can't buy with cash, so what, the calculations will be a little off. But the idea is still the same.3) It won't work in CA or high price markets that don't cash flow; 4) you are limited to the number of houses under fannie mae; 5)

Please let me know what is wrong with this model, and if you have a better model, or other ideas, please let me know. What i didn't say is that i will be doing other flips along the way with other funds in order to get more rentals.

Thanks everyone