how does refinancing work?

[Wassim Moukarzel]

Hello, 

I am just starting my real estate career (I bought a couple of best selling books and started reading) and have a question regarding refinancing:

1- If I understood the concept well, refinancing is great in real estate because you can buy a house at $100k (made-up number), fix it up to market value at $150k let's say, so you have an extra $50k in equity that you can get out through refinancing, is that correct?

2- If so, then my question is, is this actually a good strategy? Won't we have more debt accumulated through the refinancing? 

Again, I just started reading a couple of books so sorry if my question is a stupid one :)

Thank you in advance for your help!

Wassim
 

[Nathan Gesner]

Quote from @Wassim Moukarzel:

You can usually borrow around 75% of the equity, not the entire amount.

Yes, you would be taking on additional debt so you need to crunch the numbers and ensure the rental will still cash flow after borrowing against the equity.