Equity in a property youre purchasing and using it as downpayment

4 Replies

Hi BP, first time poster, long time reader. I've searched through forums, but I've been unable to find any answers to my specific question. Briefly… I have a part time business flipping houses, along with a regular career and family. The day to day of managing crews, as I've found unreliable GC's, finding properties, research, driving around, etc. is daunting and takes away from my career and my family, as well as adds a ton of stress. I currently own one two family which was my first home purchase and may only have about $35k usable equity in it for a potential HELOC. My wife and I have since purchase a single family which we now live in, renting out the two family and cash flowing. My goal is to acquire other multi-family houses and get out of the flipping SF's. In order for me to acquire these flip houses in an aggressive market, I have used hard money each time. My question is, could I acquire a multi-family house using HM, renovate it, then "sell" the property to me and use the equity build it (would be profit if I were to sell to another investor) as my 20-25% down payment, assuming there is that much built in? I've been quickly told no by conventional lenders, however, so much that is posted on BP is so incredible and creative when it comes to non-conventional ways of financing or acquiring properties. I'm looking to do this fast, and acquire more, as the health requirements of my wife (37yrs old), are reluctantly forcing her out of the workforce.

Any direction is greatly appreciated, but I also understand that there are many roadblocks along the way.

Updated over 3 years ago

Hi BP, first time poster, long time reader. I've searched through forums, but I've been unable to find any answers to my specific question. I have a part time business flipping houses, along with a regular career and family. The day to day of managing crews, as I've found unreliable GC's, finding properties, research, driving around, etc. is daunting and takes away from my career and my family, as well as adds a ton of stress. I currently own one two family which was my first home purchase and may only have about $35k usable equity in it for a potential HELOC. My wife and I have since purchase a single family which we now live in, renting out the two family and cash flowing. My goal is to acquire other multi-family houses and get out of the flipping SF's. In order for me to acquire these flip houses in an aggressive market, I have used hard money each time. My question is, could I acquire a multi-family house using HM (lender takes first position), renovate it, then "sell" the property to me and use the equity built in (would be profit if I were to sell to another investor) as my 20-25% down payment, assuming there is that much built in? I've been quickly told no by conventional lenders, however, so much that is posted on BP is so incredible and creative when it comes to non-conventional ways of financing or acquiring properties. I'm looking to do this fast, and acquire more, as the health requirements of my wife (37yrs old), are reluctantly forcing her out of the workforce. Any direction is greatly appreciated, but I also understand that there are many roadblocks along the way.

Hi Chris,

No, you cannot buy a house from yourself.

After six months, however, you can cash out refinance the property using then-current appraised value.

Thanks Chris, appreciate that. Since I would treat this similarly to my flips, where I use hard money to purchase and reno while the HML lender takes first position, I technically am not on the initial purchase, however, I have 100% control over reno, sales price and to whom I sell it to. Since I was never was technically part of the purchase in the first place, I was not sure if I could somehow sell this to myself, rather than an investor, and then use the profit I would get from selling to an investor, as my down payment. Perhaps not, but always worth a shot.

@Chris F. Even though you are using hard money and the lender has a first mortgage, you are still the owner, and you would be listed on the deed.  If you are looking to refi within the first six months, there are some national companies that will do refis with no seasoning requirements.  The rates will be higher than a conventional loan, but it could work for your situation.

Talk to your local banks - everyone of them. I called 100+ banks by me and found banks during the great recession willing to work with me. I was able to buy my houses at 80% of ARV or 100% of purchase plus renovation, which ended up being a zero down loan. These are commercial loans, not tied to your personal name