Is This Creative 0 Down Payment Strategy Possible?

[Wilson Vanhook]

Help me figure out if this scenario I thought up has potential to work or not.

First Leg:

Purchase Price: $500k

Down Payment: $100k

Closing Costs: $20k

Let's say I want to purchase a short term rental at the price point of $500k. First leg, I do my 20% down DSCR (no prepay penalties) and close like normal on the property. That means I brought $100k as my down payment and paid about $20k in closing costs, so I'm all in for $120k out of pocket and my loan note is for $400k.

Second Leg:

Loan Note: $400k

Cash Out Refi Amount Request: $500k

Closing Costs: $10k

Now for the second leg here, let's say almost immediately after closing within a month or so, I want to do a cash out refinance to pull my entire down payment out. I put in the request to refi the loan at $500k, meaning for an LTV of 80% I need the appraisal to come in at $625k. In this scenario if I can get the appraisal to come in where I want it and actually refi at $500k, the only costs I ate to acquire the property were the total $30k in closing costs. Now I hold and rent out as a short term rental.

For clarity this is not a rehab project, this would be me just trying to refi without adding value. This may sound crazy, but I own another STR in this particular market, and the reason I think this might actually be possible in based on the value of my other similar property. I own a 1 bedroom cabin worth $615k on paper and it's only 900 sqft. This new cabin I want to acquire is also a 1 bedroom but is 1350 sqft. So I really feel like it could appraise for $625k after closing the first leg and trying to do a refi. The risk here is what if I can't pull my money back out and don't get to cash out refi the amount I want. I think the gap in my knowledge here comes down to how appraisals work? Does anybody know how they get their appraisal number? Will they look at what I just purchased it at for $500k and be like no way we aren't appraising this for $625k a month later? Or will they see my newly requested loan amount for $500k and be like okay we will try to appraise it at $625k to cover this loan? Or do they actually do it the right way and pull nearby comps? What if they pull comps and they appraise it low, then I show them what my other smaller property is worth on paper? Can I ever communicate with them? So many questions on the appraisal side I really just don't know how that works. I feel like for new purchases they are typically generous and try to make sure people can purchase the property they want to. But this is a little different that a new purchase.