Would this idea be possible?

Question

Hey all,

So I have been trying to figure out ways for my wife and I to benefit most from a house hack. The ultimate goal is to be able to live for free, then move out after a year, and keep the property. Here is my question:

Would it be possible, to start an LLC or partnership for realestate investing to obtain a hard money loan for an off market 4 unit. We would get a fix and flip (80% purchase price, 100% rehab) . Once the flip is complete, sell the 4 unit from the LLC to ourselves, and using it as a primary residence for at least one year. We would purchase with an FHA loan for the new ARV, since we would technically still be a first time homebuyer as individuals, thus only needing 3.5% down. This then allowing the LLC to receive 96.5% of the ARV, unlike if the LLC was to hold the property and cashout refi only getting 80% of ARV. This would enable the LLC to pay back the hard money lender, and have more physical cash left after the transaction to put into another property, rather than leave it in the property as equity? Not sure if this makes sense but thoughts would be great if it does! Thanks!

Joe Villeneuve · Answer

No. Here's why, point by point:

1 - New LLC gets HML: Very hard to get this way. Even if you could, the HN lender would require you to personally sign for the loan, thus negating the reason why you want to do this in the first place. Even if you could, the HML would only be for 65% of what you need.

2 - Getting conventional loan to payoff HML: This would end up being a refi, which means you would have to personally own the home to do this. See #1

3 - LLC gets cash payoff: An LLC is a corporation, but it is also an extension of its members. If this was possible, you would need to have a partner other than your wife. The explanation is too long for this format, so I'll leave it at that.

Even if this was possible, you would be very hard pressed to find a property where this would work. This is another example of how thinking in percentages, instead of dollars, will lie to you.

Based on where you want to end up, I would suggest you look into either buying on a Lease Option or forming an LLC and buying from someone that has 100% equity and using a different form of seller financing. You can set up the terms so you get the same end result you are looking for, ...just taking a different path to get there. Kind of like wanting to buy 12 eggs from a vender, but the vender only sells them by the dozen. So just buy the dozen...and don't argue with vender.

Would this idea be possible?

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