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!

[Matt Motil]

There are lenders out there that will do refi's on appraised value at 3-4 months. You need to look harder. Go to smaller banks and credit unions. You might have to talk to 5, 10, 15 before you get what you want, but you'll find it.