One of those Youtube guru's advice....

[Curtis Cecil]

So let me give you some hypothetical numbers.

I buy a house for $150k. Current value is $210k as-is. ARV is around $300-$350k. So I was told that I could do a cash out refi for $150k. That puts debt against the house. I can use the funds to renovate the house and use left over to buy another house. Once I make the renovations and list the house for sale. Let's say it sells for $300k for numbers sake.

Since I have a loan that loan has to be paid off. Loan gets paid off and that leaves me $150k, the original purchase price of the house. So since I had a loan that needed to be paid and I just got my original monies back there's no profit, thus no taxes to be paid....

Is that correct? I know about 1031 exchanges to avoid taxes but not getting a loan against the house to prevent profits.... 

[Nick Maugeri]

Quote from @Curtis Cecil:

So let me give you some hypothetical numbers.

I buy a house for $150k. Current value is $210k as-is. ARV is around $300-$350k. So I was told that I could do a cash out refi for $150k. That puts debt against the house. I can use the funds to renovate the house and use left over to buy another house. Once I make the renovations and list the house for sale. Let's say it sells for $300k for numbers sake.

Since I have a loan that loan has to be paid off. Loan gets paid off and that leaves me $150k, the original purchase price of the house. So since I had a loan that needed to be paid and I just got my original monies back there's no profit, thus no taxes to be paid....

Is that correct? I know about 1031 exchanges to avoid taxes but not getting a loan against the house to prevent profits.... 

$150K cash purchase

Refi at 75% LTV of appraised value, $210K = new loan at $157,500. No debt means that's $157,500 non-taxable to you. Renovations cost $50K. Your funds in are (loan) $157,500 + (rehab) $50K = $207,500. You sell at $300K; less $207,500 + 8% selling fees ($24K) = $231,500. Your taxable gain (based on income) would be $68,500 at averaged (13%) = $8,905

I'm not a CPA, but this is a rough understanding of your position - hoping someone destroys this breakdown.