New BRRR strategy reinvented?

Question

Account Closed · Answer

@Leo Poon

Have the LLC give one of you a personal loan to purchase the property all cash. Use terms that just about any bank can beat. File deed in the county the property is in. Then refi that loan with a new mortgage. Not a cash out refi. Then new bank will then pay off the old loan. Hope this helps.

Leo Poon · Answer

@Kerry Baird Thanks, I will look into

Account Closed I found some non-QM lenders who can do 80% ARV after 90 days but with a higher interest. It seems to me this is the better way to go. As you said, I think I can get pretty busy in 90 days. Thanks

Account Closed · Answer

@Leo Poon Short answer- this is mortgage fraud. The relationship between the parties constitutes shared interests between the buyer and the seller, and enables the buyer to receive a mortgage on the property with no financial consequence in the even of default.

Don't do it, it's not worth it, I've talked to my commercial lender and attorney about this in detail because I come across these opportunities all the time. They both told me that I'm going to a lovely white-collar prison if I were to be caught. No thanks.

Cara Lonsdale · Answer

The wheels are turning...I like it....just make sure you have the road ahead before you release the brake!

Most lenders can sift through any smoke screens that you may put up like husband to wife, or LLC that you own to yourself, etc.  I think the only way for it to be considered a legit loan would be if it were a self directed IRA that issued the loan, or a loan against a 401K.  These would all be loans that have any chance to be included as a payoff in a refi.

However, even with that said, many lenders (and appraisers) will want to see receipts to validate an ARV over 20% of the purchase price within a 90 day period.

So it will be a paper trail you will need to document.

Why not just wait out the 6 months and do it legit?  The time goes by faster than you think.....I imagine alot faster than it does inside of a small cell for loan fraud. ouch.

Kerry Baird · Answer

This thread features a lender who addresses your situation.  @Leo Poon, with recording a hard money loan and refinancing soon after.

https://www.biggerpockets.com/forums/49/topics/397170-cash-purchase-and-refi

Leo Poon · Answer

Does it matter if I own the LLC, or it has to be someone else who owns the LLC? It seems to me it is the same as refinance out of hard money loan. The hard money lender file deed and the investor find a mortgage lender to refinance, but the problem is most lender has a seasoning period which beats the whole point of this.

Leo Poon · Answer

@Alex Deacon The idea is the same as traditional BRRR strategy where you buy 20-40% below market value that requires major rehab/some rehab/cosmetic only/or turnkey, and include those cost when the spouse purchase the LLC's property. If the purchase price is 100k, rehab cost is 10k, then the spouse would buy it for 137.5k. The only double closing cost that would be incurred should be an attorney's fee and title fee. Loan cost would be the same because it is just the same as refinancing.

@Jason DiClemente I haven't seen a lender that would do 100% cash out on delay financing within 2 weeks. I think all lenders, even the private non-GM lenders do 70% of the purchase price within 2 weeks of closing. If you know any lenders that can do 100% cash out delay financing within 4 weeks period time, please do share.

Alex Deacon · Answer

@Leo Poon I doubt that will work since the property will need to be appraised and the bank will question the quick turn around. its not impossible but not likely. Plus you will incur closing costs twice which can get expensive. Check with your local commercial lending brokers and ask them these questions to get their input.

New BRRR strategy reinvented?

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