1% rule in BRRRR - applies to ARV not purchase price, right?

[Angela Tod]

Hello BPers, long time reader, first time post-er :)

We are trying to refine our analysis and are getting a little confused.

Example:

Purchase Price $80,000

Rehab $40,000 (not seeing bids this low in reality...)

ARV $200,000

Refi 70% LTV = $140,000 pulled out

Assume 6% Closing Costs on the Refi (does this apply to the 140K Loan amount or the 200K property value?)

Assuming this applies to loan amount, closing costs = $8,400

140,000 loan amount - 8,400 closing costs = $131,600 pulled out

Pay back self: 131,600 - 80,000 - 40,000 = $11,600 "extra" to invest

^^^ Open to any/all feedback on the above

I know the 1% rule should be used simply as a quick way to filter whether a property is worth analyzing

In this example, we would want it to apply to the ARV, right? So we'd want to make sure it can rent for $2,000...

I can't see how it could apply to purchase price because that would mean only $800

Thank you in advance for your help!