Legal/Possible to use Private Money for an Owner Occupied?

4 Replies

Hey all, haven't been able to find the answer so hoping some people out here would help. 

Here's the story - we're moving to Panama City, FL at the end of the year. I own our home here in TX and will be renting it out when we move, also own another rental I flipped here in TX that is now occupied with tenants. 

One strategy I'm considering for our stay in FL since we will likely be there for such a short time (9-12 months, possible 3 years if my military orders are extended) is to buy a nice home that needs a little bit of work and prettying up - nothing too extensive of a rehab since we will need to live in it in a few months. Getting the repairs done and moving in. When we go to move we will have a freshly 'flipped' home that we can sell so the tax burden won't be so bad since we occupied it and it was a long term hold. 

My question is with financing - since I want to close fast to get repairs started and a 'cash offer' will also help me get a lower price, does anyone know if it is possible to use a private lender or capital company if we'll be occupying the house while we're in FL? Is it illegal since there are so many laws for FHA and other owner occupied loans that they have to follow with underwriting, appraisals, etc...? I imagine best option would be to get a private loan at 8-10% amortized for 30 years on the repayments for the purchase. I would cover the rehab and closing costs, and would sell it in a year. If we're extended, we'd just cash out refinance to pay off the private seller and either use my VA or get an FHA loan on it.

What are peoples thoughts on the possibility of this or any private lenders that would be interested in a deal like this? Thanks in advance!

It's Fede laws that regulate loans on owner occupied.....your private lenders can't/won't do it since they can't meet the Reg.s. Also, a "cash" offer means you have the cash in Your name, in the bank and a financed offer, no matter who it's from is still a financed offer.

A private lender can lend you money for your personal residence or investment property. It depends if the lender is doing 1 loan per year or it is a business for them. If your sister lends you the money, you guys can have just about any terms that you want as long as everyone is in agreement.  There are a few items like repayment term and interest rate that you have to abide by, but thats it.

Lots of people have a varying idea of what a private lender is and that is the problem. My idea of a private lender is my sister, my aunt, an old friend, another investor who does not want to rent any more houses because he is fed up with them. This is not what they do everyday, but they have some cash sitting around. I ask if I could borrow it for a year, 5 year balloon, or maybe a 10 year term. They dont make loans everyday or even every year. Its not their business.

Someone who is in the business does several loans per year or even several per month. It is how they make their income. These guys have many more restrictions and guidelines that they have to follow.

Richard- private money lenders can do all types of loans. I know a few here locally that may be interested in financing your idea. Also what Wayne said is incorrect, a "cash offer" simply waives the financing contingency. Plenty of flippers/wholesalers will make cash offers when their intent is to use private money. They are simply waving the contingency that would protect them should they not qualify for traditional lending. 

Thanks all for the advice, this helps. Probably will try and keep it at Private money at this point as it will be cheaper and more flexible. Sounds like it will be feasible, I just didn't want to run into any weird rules with HUD or FHA or someone making a mortgage without doing all the necessary underwriting and investigation that goes along with a conventional loan.

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