Rinsing and Repeating with private money

[Peter Eberhardt]

Hey BP, 

I have been looking into hard money and private investor loans, and how investors use these loans to refinance a property after they fix it up into a conventional loan. You all know the story, they pay back their hard money loan and at the end of the day if they do their numbers right, are essentially into a long term loan with 0% down. But when I search on the internet the term "private money" is still referring to hard money or money that is acquired through a non family member with a interest rate.  

My question is, is it possible to do this somehow with a private (think family member private) loan?  For example, I want to borrow cash from a family member, buy a distressed property all cash, fix it up, and then get a conventional loan on it and pay back 100% of the money (plus some interest so their money is working for them too) I borrowed from the family member. So essentially, in the end I would be borrowing a large amount of money from a lender and just using the property as colleterial until I paid it back like a typical loan but the property would already be paid off. It would almost be like I am selling the property to myself.

Is this a thing that some investors do? Would it make a difference if I bought the distressed property all cash as a LLC? I.e. is there a commercial product that might work for this situation?

Thanks in advance!