You cannot finance more than what wouldve been available in the initial purchase or use any improved value or new appraisal to increase the loan amount. 

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss.

Initial Inspection and Assessment: Document property condition before work begins. 

I would like to update my initial response.

Initial rent was $575 per side.

Initially, all new residents stay for about 6 months in our largest home.

Your initial post was unclear whether the water bill was $2k/month or if the balance was $2k because they weren't paying you for it.

Hi,People always talk about how they purchase a rental property, wait a few years for it to appreciate, do a cashout refi to recoup their initial down payment, then whatever they earn in the future is infinite return.But in reality, how is this truly a "recouping of initial investment" when you have to pay a 4.5% interest to take out the cashout proceeds (with $3000-4000 of closing costs on top)?

It’s the initial loan that’s more the issue.

By year 5, I will have a 100% overall return on my initial investment of only $24k!