Most recently I have partner with someone who is very family with real estate investing. He has allowed me to go in on a project he just picked up. A house that needed a lot of rehab he was offer a extremely low purchase price. He owns a contracting company. Therefore, he is doing all the fix up. I have read and study the idea of BRRR, so my thought process was to refi the home after he did the repairs and pay him for the contracting work after I refinanced the property. But Now now he has brought up the idea of purchasing the home by getting a loan from the bank (this way the appraisal will be higher and I could get 100% vs 70-85% of the value under a refi) I've never heard of this, so I'm wondering if this is ideal to do?
@Account Closed , first and foremost, will this property make a good rental? Have you done a full rental analysis? What is your all-in price, the ARV, the expected rent.
I don't really understand the loan thing you're describing. When you refi (after the appropriate seasoning period) most lenders will allow 75-80% LTV based on a new appraisal. I don't know any lender that is doing 100% LTV, especially now.
The all in price is 75k and the ARV is expected to be 130k. The idea is for me to purchase the property after the repairs are complete, from the LLC the property is currently held in. Therefore, I'd get a mortgage on the property for the full value and the proceeds would be split between us since it's paid out to our LLC.
Okay, if you purchase it as your personal residence, then you can probably go as high as 95% LTV. The only way you're going to get "a mortgage on the property for the full value" is if you use a VA or USDA loan, @Account Closed . Probably not a good choice in your situation, since there are additional costs that typically get rolled into the loan.
It's worth discussing your plan with a CPA and/or attorney. You are a partial owner of the LLC, which means this will be a non-arms length transaction. That can come with some complications and extra scrutiny.
@Jaysen Medhurst thank you so much!