Refinance after cash purchase

[Ryan O.]

I need some input for the community.  I have a friend who's daughter is shopping around for her first home. They are hoping to purchase a distressed property and rehab it for the daughter to live in.

The strategy is for my friend to loan his daughter the purchase price of the home, say 180K, so she can have the advantage of purchasing with cash.  Lets assume the loan will not be recorded.

The daughter will use her own funds to rehab the property, refinance with a conventional lender once the rehab is complete, and pay back the loan from her father.

Will a lender allow this?

If so, are there any seasoning requirements?

How much would the daughter be able to refi for?

Thanks

[Troy Young]

It varies. That is basically how I got started. I was told that if I refinanced it would be based on the appraisal and the appraisal would be highly influenced by what I paid for the house even though I remodeled it. They told me that if I waited 6 months they would go off the SEV or would give me a more accurate appraisal (to include money I put into fixing it up rather than just the sale price). I chose to wait 6 months and they gave me about 3 times as much as I paid for the house without any stipulations on how I could spend it. I used that money to buy other houses cash and after another 6 months to a year I refinanced those to buy more etc. Different banks and lenders have different rules so make sure you don't sign a contract agreeing to use their money in a certain way that you rather not. I really doubt you would run into that problem though if the loan isn't recorded. If you record the lein they will make you pay that off first.