Creative Financine:Buy Under Your Own LLC & Refinance to Yourself
This has already been briefly talked about on here but I wanted to run it by anyone interested in a discussion(especially lenders). The quick and general idea here is; you have some cash, create an LLC, have that LLC write you a note on a loan for a property, buy the property under your name.
Once property is financed using your LLC, refinance under conventional loan of say 15% down (if primary residence). In theory this method should be much better than a cash out refinance because you would be able to get regular refinance rate, are not limited to 20%-25% down which you regularly are on a cash out refi, and are not limited to purchase price but cash out is based on appraisal. This allows you to potentially pull out more cash than you put in.
In Depth;
Scenario 1:
- You or your family have an LLC named FLLC with $X cash reserves
- You place an offer on a property and purchase it via loan / note written from the FLLC(lets say 15% down);
- You then immediately go for a regular refinance and are able to to get down to a 15% down conventional as a primary residence or a 20% down investment property
Scenario 2:
- You or your family have $X in cash reserves
- You place an offer on a property and purchase it via cash
- You then refinance immediately via delayed financing exemption (this may cost you higher interest rates because not all banks know about this or are willing to do it and this is a cash out refi which is a different product than a regular rate and term refi, again more points higher cost)
- You can only refi up to the cost of the purchase price + renovations cost OR appraisal price - whichever is lower
You can see the clear powerful advantages of scenario 1 here if you purchase a property below ARV- my only concern is;
- In scenario 1, banks will need your statements and will pull your credit, they will easily see that your HELOC or cash reserves or whatever were transferred to your LLC account and thereby be able to identify that the LLC funding you is yours. Is this a problem?
Anyone else have any input on these two methods?
