BRRR quandary

[Aisha E.]

I recently bought a house from two brothers who had inherited the property as part of their deceased mother's estate. I paid them what they were asking for it; almost the cost of the land only. The 90 house needed a full gut rehab since it had been vacant for almost 12 years. I converted and expanded it from a 2/1 to a 3/2, with an entrance foyer, new master bathroom, master walk-in closet, a laundry room, thereby adding 255sq.ft to the original house. Location: Rapidly changing area with new commercial development less than 1/2 a mile away, and older houses being rehabbed. A sought after charter school. Huge swathe of land in 100's of acres 1/4 block away ready for a developer to swoop in and start building. Very stable neighborhood in transition. 3 exits away from downtown. The numbers: BP: $15,600 Rehab cost:$49,000 ARV: $110,000 as of right now Market rent: $1050 The house sits on a 10,000 sq.ft lot that I intend to get te-platted into either 2 lots, or get permission add a mother-in-law's cottage/structure in the back to be rented out separately. Following the BRRR principles, I started inquiring about refinancing the house. I was informed the lender will base his loan on the buying price and not the appraised value of the house as it stands. My point: it is my business savvy to finagle a good deal, create value out of something. This seems like getting penalized for being smart. Please help me figure out a way someone else has come across for a situation similar to this, and how they were able to get their cash out. Why is the improved asset not being regarded as the product against which to do a cash-out refinance. I intend to keep the house for the long term. I intend to buy more houses and lots in the area. Thank you.