BRRRR Question

[Mikael Winkler]

Hello all,

I have a quick question about the BRRRR strategy. I am planning on buying my first owner occupied duplex in the near future with an FHA 203k loan, allowing me to roll rehab costs into the mortgage. After running numbers on a handful of properties, I'm seeing it's obviously very hard to break even on a duplex under FHA terms, much less cashflow, as there's only one unit producing income. So, I then plan on getting the property rented, reappraised and refinanced into a conventional loan.

My question comes in how that works. By refinancing into a conventional, are you essentially pulling the increased equity of the property, after refi, out to use as the down payment of the conventional loan? 

Thanks everyone!