Rate of Return Calculations Question

[Aaron Boatman]

Here is some background. I want to purchase a property, rehab it then do a cash out refi for 80%LTV which will easily pay off all debts and myself back. When working my ROI Math how does one factor a cash out refi in to the mix, because in my eyes by the time it goes through (6months) I will have a loan on the property with essentially zero out of pocket as I put my own money back.

Please tell me where I am wrong and correct this newbie.

Purchase price $40K
Own money $10K
Private money $30K
Rehab plus fees and interest $6K
Appraised at 80K
Refi for 50K create bank with reserves and pay everyone including self back. :)
Rent $725/month @ 100% occupancy
Taxes 2000/year
Total Mortgage $500

Rate of return = ???