Creative Financine:Buy Under Your Own LLC & Refinance to Yourself

[Edit B.]

This has already been briefly talked about on here but I wanted to run it by anyone interested in a discussion(especially lenders). The quick and general idea here is; you have some cash, create an LLC, have that LLC write you a note on a loan for a property, buy the property under your name.

Once property is financed using your LLC, refinance under conventional loan of say 15% down (if primary residence). In theory this method should be much better than a cash out refinance because you would be able to get regular refinance rate, are not limited to 20%-25% down which you regularly are on a cash out refi, and are not limited to purchase price but cash out is based on appraisal. This allows you to potentially pull out more cash than you put in.

In Depth;

Scenario 1:

1. You or your family have an LLC named FLLC with $X cash reserves
2. You place an offer on a property and purchase it via loan / note written from the FLLC(lets say 15% down);
3. You then immediately go for a regular refinance and are able to to get down to a 15% down conventional as a primary residence or a 20% down investment property

Scenario 2: 

• You or your family have $X in cash reserves 
• You place an offer on a property and purchase it via cash
• You then refinance immediately via delayed financing exemption (this may cost you higher interest rates because not all banks know about this or are willing to do it and this is a cash out refi which is a different product than a regular rate and term refi, again more points higher cost)
• You can only refi up to the cost of the purchase price + renovations cost OR appraisal price - whichever is lower

You can see the clear powerful advantages of scenario 1 here if you purchase a property below ARV- my only concern is;

- In scenario 1, banks will need your statements and will pull your credit, they will easily see that your HELOC or cash reserves or whatever were transferred to your LLC account and thereby be able to identify that the LLC funding you is yours. Is this a problem?

Anyone else have any input on these two methods?

[Andrew Postell]

@Edit B. the first thing that we should be practicing is only working with lenders who work with investors and are investor friendly. Most loan officers do 1 investment property loans for every 50 that they write. And the industry average is 2.5 loans per month. Which means that the average loan officer writes 1 investment property every 2 years? Yup. And that's the issue. Everyone will say "yeah, I can write investment property loans"...but very few are experts and it. Try going to a lender and saying "I'm going to house hack a property I got subject to that I'm looking to BRRRR"....they won't even know what you are talking about. This means, you shouldn't work with this lender. So how do you know if a lender is "investor friendly"? Receiving a recommendation from another good real estate investor is a great way to start. I wrote a series of questions I want you to ask any lender you interview. If you find a lender who can answer these well then maybe they will be a little easier to work with. Here's the list:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?