I am looking for creative ways to purchase a second home for little to no money down in the same city and thought of this idea from the BRRRR Method. How feasible would this scenario be?:
I find a house from a wholesaler and fund the rehab using a hard money loan under an LLC. Once the rehab is complete, I move into the property and I act as the tenant. After 6 months of seasoning, i cash out refinance the property to recuperate my down payment and make a return on my investment. As i result, I would acquire a residence with little to no money down.
Are there any hurdles to renting the property to yourself under an LLC or would it create problems when it comes time to cash-out refinance. Would i keep the property under the name of the LLC or would i transfer the loan to my name? What are some of the things I may have overlooked in this scenario? Let me know your thoughts! Thank you! :)
@Charles Wisniewski , first off, HMLs aren't no money down. Typically, you have to put down at least 15% of the purchase price.
Is the intention here to get a personal property or an investment property? If you want a personal property a FHA loan is a way better way to go. You can even roll in renovation costs, depending on the property.
The whole renting to yourself part might get sticky. You'd need to pay market rent and I'd definitely talk to your CPA first.
@Jaysen Medhurst Yes i understand that HMLs arent no money down, but the intent would be to get that initial down payment back during the Cash-out refinance. But i didnt think about the market rents which would be a fair deterrent.
As far as FHA, that wouldnt work because it would be for a second personal property that isnt my primary residence. This wouldnt be an investment property.