R&T refi after buying with cash/private loan

3 Replies

How can I continue leveraging parents' cash and do R&T Refi's to keep rates as low as possible?

Wifey & I have 3 SFH in Texas using BRRRR, and are looking for more. We bought each with a private family loan in order to appear as a cash buyer to the sellers, since our target neighborhoods are so competitive. The private loan funds *prior* to closing, and we bring those funds to closing. Our Title Co still files a DoT w/the county to secure the private loan, and later we do a R&T refi with a conforming loan to get the family cash back in order to do it all again later. We'd be happy to continue this model, but the new x-factor is my aging parents will soon no longer be mentally capable of signing legal docs.

I already have full POA, but after talking with our Title Agent after our most recent closing, using my POA in this situation might be viewed as self-serving and lead to issues or delays with refinancing, depending on lenders' attention to detail and/or appetite for such a situation.

I'm looking for a way to stay with a R&T refi and not cause heartburn for lenders. Would one creative solution be to setup an LLC to act as our private lender, for which wifey & I have signatory power? Granted, in spirit, it's the same as potentially using my POA in our current model - in the sense that we're authorizing a loan to ourselves (making payments too, of course), and then we would subsequently release our own loan after the R&T refi closes.

I know we could just use the fam's cash, without the private loan bit, and do a cash-out refi, absorbing the slightly elevated interest rate. But like I said, if there is a legal/ethical way to use the cash without dealing with higher cash-out refi rate, I'm all for it. Even 1/4 pt higher rate would cost more annually than operating an LLC in TX.

If I'm missing another option, let me know. 

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Keep doing what you are doing, but use other friends and family. Your whole focus should be finding other people to lend you the short term money as well as finding great deals on homes.

Start learning about how people can lend you money from their past 401Ks or IRAs if they move the money to a self directed IRA.

@Brit F. Yes!  You can do EXACTLY what you are describing!  Now, admittedly, a lot of banks just don't understand investment lending but as long as you are working with a bank that understands this process you can keep doing it.  I wrote a pretty lengthy article about this HERE I wrote it with the intent of showing an alternative to buying with cash and facing the delayed financing rule but it's exactly what you are speaking on.

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