Question?

[Calixto Urdiales]

Hello there everyone I have a quick scenario I would like to mention and see what feedback I get from BP's forum members. Enjoy!

An investor finds a property that is substantial discounted and pays for the property cash. He then obtains a loan and pulls out as much equity as he can (with no pre-payment penalty) through the refinance. And lastly sells the property for a short profit (or breaks even), what happens to the money he pulled out?

1. Does it get taxed?
2. If not he only pays taxes on the interest it builds in his account?

Purchase: $50,000
Rehab: $25,000
Loan: $125,000
Sells: $145,000