Dodd-Frank and 1st MFH purchase for owner occupied

[Aksel A.]

Greetings everyone,

This topic has probably been discussed elsewhere, so please feel free to redirect me accordingly and paste links as desired.

My case is simple to summarize:

- I want my 1st home purchase to be a cashflowing MFH. I found a good 4 unit family deal at about 25 miles from Boston for 200K.

- I plan to occupy one of the units and rent the 3 others

- The seller is said to accept cash-only transactions

- I am pre-approved for almost 4 times the property list price by multiple institutions for FHA and Conventional loans, such as QuickenLoans, Fairway Mortgages, Freedom Mortgages, Village Mortgages, etc

- Just in case, I also have one private money lending connection at a rate of 12%

Here is my dilemma.

Because of the cash-only transaction, it is my understanding that I cannot resort to any of the lending institutions above, and rely on some sort of direct funding.

However, it appears that Dodd-Frank law prevents private money lending for funding my very 1st house purchase for owner occupied type investments.

Here are my questions:

- Is the above true? Should I completely rule out PML and HML from the picture for my case?

- Does it make a difference if I put the house into my LLC instead of my name to get around the problem (while still living in the property as owner occupied)?

- It appears that the Trump administrations is changing (or just changed?) something specific to DF. Are we in some sort of status-quo where DF may not apply to me here?

- Bonus: Is there any alternative for me, such as asking the seller to be open to seller financing (provided DF doesn't forbid it too), or else?

Trying hard to kick-start my business with a strategic cashflow friendly move, I welcome your advices or suggestions, and like I said, any existing resources will help me a long way.

Thanks

[Roman M.]

You  should ask the seller why he wants cash only. A lot of times sellers put that because they don't want to deal with mortgage contingency in the contract where the buyer doesn't get approved last minute and the sale doesn't go thru. Or maybe the propery won't appraise at the negotiated price. 

If you are confident enough that you can get financing and have a back up plan then you can make cash offer (not contingent to financing) & still apply for financing and close with the lender of your choice. If it goes thru then seller will get their money the same way at closing as if it was a cash sale. The risk for you if the lender doesn't come thru and they won't fund the loan for some reason and in this case your deposit is on the line. 

So it's good to have a back up plan that is in the contract and have some other contingencies so you can walk away if you know that lender won't approve such as:

1. Long inspection period. If you put 30 days then it's long enough for the lender to approve or deny your purchase 

2. Make contract assignable to A newly formed LLC. Private lender can fund an LLC purchase as it is Dodd Frank compliant since it will be considered business to business lending. Just don't tell them you are planning to live there.

3. Small earnest money deposit that you can risk loosing if your financing doesn't go thru.

4. Option to extend the contacts for 30 more days by increasing the price by maybe $5,000. This way seller gets more money if they willing to wait. This you can also negotiate later if you run into trouble with financing .