HML Holds Title; Refi to Conventional Loan

5 Replies

Hi all, 

The HML I've used for a number of deals holds the title to the properties that I flip w/ their financing. When I sell the property, they cut me a check equal to my profit on the deal. This is fine.

I would like to use the HML for a buy & hold strategy, which would obviously involve a refi after a 6-12 month seasoning period. However, since I do not actually hold title to the property (the HML does), that creates a bit of an issue for me. Typically we've done rate & term refi's with our lender (private money to conventional), but that would not be possible in this scenario as I do not hold the title and the HML does not hold the note.

Any sense of how I can get around this issue?  Could we put the title in escrow? 

This is in Cleveland.  Not sure if that matters! 

You don't have a loan, @Zoran M. , you have what sounds like a partnership where one partner puts up all the money and the other does all the work. A 50/50 profit split here would be fair and I hope this HML is not deducting points, fees, and interest from your portion. In fact, since this HML is the property owner, you should secure any money you put toward the deal with a mortgage. I also hope you have a fair partnership agreement defining all the terms of your relationship and that you are not being taken advantage of, which I fear.

So long as this lender is willing to provide relatively long-term money at favorable rates, you should buy the property in your name, or that of your entity, and your HML should provide the cash using a note secured by a mortgage. Here, you'd pay appropriate points and interest using a traditional loan and actually own the property. The way you are doing it now, you actually own nothing.

If this lender insists on owning the property and calling you a borrower, then find a real lender willing to make a relatively short-term loan who is willing to wait out your seasoning requirements.

If you stick with your current arrangement then you would have to purchase the completed house from the "Lender", not a refi but a purchase.  

If Ohio is a mortgage state with a long foreclosure process then I can see why the lender wants title... they are not a lender at that point as described above but they are a JV partner. I do this exact same thing with my Trusted flippers... works great... No debt on property no payments to be made very simple they do what they do then we split profit at the end everyone gets paid off of the HUD and no one gets money early. we all get paid on the exact same day I like that aspect..... I don't take the lions share the flipper does in my deals... And unlike the guys in Florida I don't charge 7500 for the privlage of showing me deals that I may or may not do LOL.

Having been a HML in the day this set up on OUR side is so much easier than going through the loan process.. But its also not an arrangement you make with a typical borrower its an arrangement you make with very close knit associates that want access to substantial capital.. Many of mine have 7 figure with me... And I run their entire A and D for their flipping business... I would not do these deals one off and or advertise for them which I don't etc etc. Its not the HML business...Its the long term relationship business.

Zoran, 

switching horses midstream is never a good move. If you want to get into buy and hold, you should plan accordingly from the outset. Switching a flip to a buy and hold is usually only because you can't sell the property which means you're taking on a lemon anyway. 

It also sounds like you have outgrown your existing partner who is obviously dictating all the terms of the relationship. You might be experienced enough by now to change your model and move yourself up the ladder....  

Take a look around and see what your options are. Meantime, get this deal wrapped. if you want to ramp yourself up, your first move should be a business plan which takes time and research....

best of luck with it.

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