Complex Exit Strategy Advice Needed

[Daniel O'Dowd]

Happy Monday,

I need some advice/help navigating getting cash back out of a deal. Long story short, I'm a new investor (5 SFH so far in North Carolina) and have been acquiring buy/hold property which is quite slow for my taste so I decided to try my hand with value-add investment. On my most recent project, a wealthy family member of mine offered to fund the cash acquisition/renovation of my next deal interest-free as a gift for graduating grad school as long as I returned that cash back as soon as possible. I have my own investment capital but this was too good of an offer to turn down.

Said project went better-than anticipated and I finished a complete renovation of a SFH in 8 weeks and right under budget.

The problem is that I asked said family member to keep the property under his name so that even if the property failed to appraise well, I could use a conventional mortgage to buy back the property with 25% down of my own money and give this family member their money back.

Fast forward to today and I spoke to my lender about the possibility of delayed financing once the appraisal was complete in order to cash my family member out of the deal. However, my lender said that this is not possible (gifts of equity only apply to primary residences?) and that I'd still either have to straight up buy the property with 25% down from him or have my name put on the deed and BRRRR out the cash in 6mo.

I was hoping to use delayed financing as this is the only "cash out" method of acquisition I know of that doesn't require a 6 month seasoning period. Does anyone have any advice on how to avoid this wait and/or 25% down conventional mortgage?

Thanks again!

[Chris Seveney]

Quote from @Daniel O'Dowd:

Happy Monday,

I need some advice/help navigating getting cash back out of a deal. Long story short, I'm a new investor (5 SFH so far in North Carolina) and have been acquiring buy/hold property which is quite slow for my taste so I decided to try my hand with value-add investment. On my most recent project, a wealthy family member of mine offered to fund the cash acquisition/renovation of my next deal interest-free as a gift for graduating grad school as long as I returned that cash back as soon as possible. I have my own investment capital but this was too good of an offer to turn down.

Said project went better-than anticipated and I finished a complete renovation of a SFH in 8 weeks and right under budget.

The problem is that I asked said family member to keep the property under his name so that even if the property failed to appraise well, I could use a conventional mortgage to buy back the property with 25% down of my own money and give this family member their money back.

Fast forward to today and I spoke to my lender about the possibility of delayed financing once the appraisal was complete in order to cash my family member out of the deal. However, my lender said that this is not possible (gifts of equity only apply to primary residences?) and that I'd still either have to straight up buy the property with 25% down from him or have my name put on the deed and BRRRR out the cash in 6mo.

I was hoping to use delayed financing as this is the only "cash out" method of acquisition I know of that doesn't require a 6 month seasoning period. Does anyone have any advice on how to avoid this wait and/or 25% down conventional mortgage?

Thanks again!

 What about having them sell to you via seller financing. So they would deed it to you and record a mortgage and note. Then you could refinance the property with a new lender. This would not be a cash out but a refinance which I do not believe requires a waiting period.