Hello BP. I have a question for all the lender's and investors who have had experience with this situation. Our LLC has purchased a property with the intent to fix and flip. I am currently renting and am considering purchasing the home from our LLC. Can I use my VA loan benefit to purchase the property from my LLC since it will be a primary residence, and pay off he hard money loan used to purchase the property. Can this even be one since I am a managing member of the LLC, & is there any conflict of interest issues to deal with. Thanks.
good question. . I really want to know the answer to that question?
That is a very specific question but there are probably a few people here that can answer that. I would suggest you visit the va website to get some clairification but I think you will have to call.
Before you do that I would ask a good mortgage broker, your accountant and lawyer. I would be leaning towards it being ok but I don't like messing with the government sponsored programs.
Bummer to be doing fix and flip business inside an entity that best caters to buy and hold / passive income and asset protection.
My guess is it has to be an arm's-length transaction but I am no VA loan expert. The VA loan is just an expensive low DP loan disguised as a 'thank you' to vets, IMO. I would save up some more money, wait for price seasoning and go conventional. Thank you for your service from a fellow vet @Angel Rivera !
@Angel Rivera What you are suggesting is a non-arm's length transaction. These are tricky and heavily scrutinized for fraud/conflict-of-interest.
If you intention is to truly occupy the property as your primary residence, and can provide a satisfactory evidence/story to convince the underwriter then most likely you should be OK. I say most likely because in these type of transactions even the smallest thing can result in the loan being declined (e.g. DTI of 45.2% when max is 45%).
Upen Patel, Mortgage Banker
Federal NMLS# 1374243
@Steve Babiak you're right and I don't know if he's elected corporate tax treatment. So many 'sophisticated' methods of investing get folks' rears in cracks I probably got carried away.
@Angel Rivera - I am not a tax adviser or attorney. My statement about LLCs should have ended with ...in general. Cheers!
Thank you all for your advice and comments. Oh and yes, our LLC is S Corp tax classified.
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