Get a loan from your LLC and protect your asset at the same time?

[Eddie Ziv]

Here is something I'd like to hear (read...) your opinion about.
It was brought to my attention by a member of BP and it seems like a wonderful idea. . Lets say that you bought a property using cash and now it's free and clear, You would like to rehab it and then rent it out, but you also like to get a conventional loan after you're done with your rehab. There is a way around the "cash out" hurdle. You create a corporation or an LLC. Then, that entity creates a loan document and a note lending you the money which is equivalent to 65% of the estimated ARV. You record that note (Very important)
After you are done with the rehab, and you waited the seasoning period, you can go to a local, friendly bank and apply for a rate and terms refinance. Since this is no longer a "cash out" loan, the bank is "protected" by paying off the existing loan.

Now here is possible an added value to creating such note even if you don't think about refinance. If you don't want to transfer the property to an LLC, Corp. or such, it seems to me that it would give you a layer of asset protection since the property has a lien against it already.

Please, give me your thoughts and your challenges.