BRRRR - Issue w/ Refi

[Kenny Dahill]

BP Community, I'm running into an issue and want some advice.

This summer I purchased a distressed property using hardmoney, 80% LTV. I spoke with a lender I've used in the past and explained our game plan and there was no concern except to have a promissory note and deed of trust. So we moved forward...

The house is now complete and I'm trying to refi the property but running into this issue: because I have owned the property for less than a year, I can only refi the initial loan and not 75% of the appraisal.  My lender suggests revising my promissory note to show the amount for the new loan amount.  This would result in the lender writing a bigger check to my hardmoney lender, who would then take his cut and pay me back the remainder since that would be my cash created - this is because my refi can't be a cash-out but this is a way around it.

My concern is the hardmoney lender would be a high probability for audits, but after talking with a CPA I was informed you can gift $14K without being taxed.  The hardmoney lender suggests that we re-record the Deed of Trust showing the new amount, but this will cost more money to do so.  Can we get by without having to re-record the Deed?

Has anybody had this issue before trying to refi an appreciated property within a year?  What solution did you end up doing?  If I were to refi with a private portfolio lender would this be an issue at all?  My goal was to take out some of my initial capital.

Thanks for your advice/time!