You will live there for a year, hopefully get some equity so that when you refinance into a conventional, you can cash out, but in this market that is pretty unlikely.

Second, we’ve refined our screening process for the clients we bring on.

However, I didn't continue this since I couldn't find any deals that would allow me to do a full cash-out refinance.  

I would then renovate, rent, and refinance.

Risks and ContingenciesWhat happens if I can’t sell or refinance the property within the loan term?

But would I tell a person I don't know to find and buy a severely distressed property, take out a hard money loan to buy it, perform a monster rehab, and then refinance and hope for the best? 

You can refinance an FHA loan in as little as 6 months if there is enough equity.

You can refinance into more traditional loans later, but that initial speed matters.

Will I only be able to mortgage the purchase price and costs, or will I be able to do a full cash out refinance and tap into some of the added equity of renovations?

I also think that if I can make all of my money back in 4 years with a cash out refinance, what is the danger?