Over stating the rehab to increase the LTV/LTC? Decrease skin in the game

[William Kyle Walker]

I have been looking into lots of information about the 504 SBA loan and was thinking of a new strategy and wanted to get some input on the idea. I have a feeling that it might be on the grey side of legal but not sure. An SBA 504 loan can be structured with 50% from a private lender and 40% from the CDC/504 and with the buyer putting in 10% of there own cash. If the property is 2M and the renovation is 1M. So 3M is total capitol needed. 1.5M from private lender 1.2 from CDC/504 and 300k from me. It is a smoking deal at 2M. After all renovations it is worth 7M and my company will occupy 51% and lease out 49% for a positive cash-flow.

Could I add some fees and inflated estimations to the rehab costs to make the deal 3.5M? Then I would be looking at 1.75 from a private lender 1.4 from CDC/504 and nothing from my pocket and an extra 150K just incase something came up.