Found a badass property that has a lot of potential. It needs about 30k of work, can probably make at least 50k on the back end (not including interest from loan) so lets say 25-35k with minimal work. Has to be cash due to repair work. Already tried 40k down and owner financing, they didnt go for it. My options are
- Make offer stipulation I can get financing
- Wait and hope it doesn't sell and remake 40k offer with owner financing
- Obtain private loan (already tried family and friends, all too risk averse and uneducated) make low cash offer
Friend of a friend put me in touch with some bigwig hard money lender with a legit company. He was explaining to me that he can't loan money to me personally, but since I am a business owner, he can loan it to my company, or i can create company for this purpose. However, the fed regulations say something like the loan can only be for a flip, not an owner-occupied. We want to live in this home for some amount of time. He said the company can lease the home to someone (me) legally.
I was thinking maybe we can use the hard money lender, fix it before we move in, then sell it to ourselves somehow? We are not married... is there any way to do this legally?
This has all happened really fast, and I am trying to make this deal work because its a good one. It is also my first deal, so I am learning a lot, but my realtor is also a BP member as is helping a lot. IF nothing else, I am getting a ton of experience.
Please give me some advice on how to make this work, legally, or other option I may have. And correct any points that I made that are inaccurate. Thanks!
Purchase with hard money. Fix/renovate property. Mortgage/refi with 30 year loan (or whatever, standard mortgage). Pay back lender.
So, can I sell it to myself, through the company that I create to get hard money loan?
@Dillon Seal , I'm confused regarding the HML's requirement. Typically you need an exit strategy for any HML because you don't want to pay the points/fees for a long period of time, as that will eat into your profits. Secondly, if you plan on not selling the house, and just refinancing it, do you qualify for a refinance? You need to figure out that first and foremost. Most banks will do a cash-out refi for 70-80% of the home's value. So what you really need to do is calculate the costs of the HML fees and then determine if you can pull all your money out if you do a refi and not a flip.
We are planning on qualifying for a refinance early next year for these two reasons: and please correct me if I am wrong
1. I am self employed, and will claim 60k/year for 2017 and 2018 with no debt. I cant file for a mortgage until early next year since self employed
2. Partner is getting a job in a month (already accepted position) and she has great credit
Do you see us having any issues with getting refinanced? Is there any way to see if it is possible before I begin? Thanks!
Also, please clarify:
As I understand it, I have to start a separate company that is what the HML is actually loaning the money to. Then I can sell it from that company to someone else. So would that be a normal mortgage, and we are buying it from my company?
@Dillon Seal You can purchase with hard money do the fixes and then refinance to pay off the Hard Money Loan and once you refinance and pay off the Hard Money you can move into the property.