New idea .. Do you think it can work? would love suggestions

[James Bailey]

Hi all, 

I'm up in Alberta, Canada and it gets pretty cold here in the winter. I have buy/holds and I do some flipping but the market really slows down in the winter and that's not a time that I want to try and flip a house, so I thought about the BRRR strategy that I've read about here on BP.

The problem with trying to do that here is the LTV on a refinance is only 65% so trying to pull that off here will invariably leave me with my own capital tied up in the rental property, which I would rather not have. I need to turn around and use that money for more deals.

Since on a regular mortgage you can easily borrow 80% LTV, If I enlist a partner to buy the house from me, we can share interest in the house and I won't have to tie up my money...

SO HERE'S THE IDEA

Step 1: Buy SFH with hard money, fix it up and install a legal basement suite.

Step 2: GIFT the down payment to said partner (through a proxy) which will be paid back through the profit on sale along with my original investment and capital gains when I "sell" them the house. 

At this point. My partner has acquired a property with no work and no down payment. Great deal for them! Wowee

Step 3: Open a caveat on the property in my corporation's or another partner's name.

Step 4: Both suites in house and garage are rented out. (approx. $600 Net income monthly)

Step 5: Through a carefully written contract, my partner, the new owner of the house, will hire my corporation as their property manager on an X year term for something like $400/month or potentially some percentage of equity.

My benefit now is a nice passive income stream, and perhaps best of all, I will not be limited to the number of houses I can do this on, opposed to putting mortgages under my name with I will cap out on and probably not even get approved because I'm already leveraged out pretty hard.

This is the first time I've written down this idea, I've mostly been confusing myself and others around me with eccentric ramblings thus far so I hope it makes sense. Let me know if you think it can work and definately if you have any suggestions I would really appreciate it. Thanks!!

James

[Don Konipol]

@James Bailey, your scenario is a "little clunky".  Lots of legal documents for relatively small deals - and a lot open to legal challenges.  Simplify.  Raise outside capital in a fund for the down payments - Then share ownership with your company as "general partner".  

Or simply purchase property with seller carry back financing.  Or "subject to".