Riddle..I thought I knew what I was doing...

[Pete Schwan]

So...I recently bought a property planning on using the BRRRR strategy. I used a private lender because this property was a "3 Season" cottage on a lake and didn't have heat or insulation, and therefore wouldn't qualify for a conventional mortgage. The purchase price was $65K with a professional appraiser's ARV of $130K. I put 20% down and the private lender came in with 80% and added a $20K construction loan. I've completed renovations and am thinking I can do a cash-out refi, take out the private lender and access some equity for another investment. I put the property in an LLC, thinking this was the right thing to do.

So now I'm calling all the QuickenLoans and Loan Depot's of country and no one will touch it because: 

A) Its not my primary residence 

B) I haven't owned it for a year 

C) The private lender isn't reporting the monthly payments to a credit bureau so I don't have a verifiable proof of payment 

D) Been doing AirBnB, so no lease (if I wanted to get 2nd home or rental property financing)

Solutions I'm aware of: 

1) Most loan officers have suggested I call a local credit union, which I have done> The credit unions are concerned because it's not my primary and I don't have lease in place with proof of payments via bank statements. And also concerned about the property being owned in by LLC (I'm the sole member).

2) I could "make it my primary residence" temporarily but that would mean changing all my info to receive mail at this location. I live 4 hours away from the property and would need to have my property manager mail me my mail. 

3) Ask my private lender to refi the loan with him and give me a more favorable rate.

If anyone has been through this before please comment and offer some advice. I thought this would be straight forward but I guess I didn't do my homework.

Thank you BP community!

[Garry C.]

I wouldn't worry too much about the LLC thing. If it's really an issue, you can always deed it back to yourself temporarily. After securing bank financing you can deed it back to the LLC, just give it at least 90 days under the new loan, most banks don't seem to care after that. Although keep in mind this could make the bank call in your loan, but I've never heard of that actually happening.
Also, many people suggest a quit-claim deed for this. I wouldn't go that route, as you lose some of your title protections that way. Do a warranty deed to be safe.

You need to find a local mortgage broker in your area. They usually deal with a lot of banks (like you're attempting to do on your own right now), so they have an idea on who can best service whatever type of loan that you need. They can also make you aware of some of these 'gotchas' before you're too deep into the process. I would reach out to your agent and ask for a referral, or make a post here on BP that you're in need of some help from a broker.

I wouldn't try the Primary residence thing. Pretty sure that would be seen as fraud if uncovered.

If you think the private lender might refi the loan with a better rate... I would start there for sure. The worst they can say is 'No', so give it a shot. If nothing else, they might be willing to extend your current terms (if that's an issue) until you get the refi figured out.