I found a quad plex, decent shape, and should be around 2K a month gross rents.
List price is 99K. I was thinking about offering 80/85K and hoping they bite…
So here is what I am after…can I have the seller “sell” it to a land trust at 80K and then have my land trust sell it to my LLC for 100K? I would get commercially financed for the 80K and then pay a downpayment of 20K to myself through the land trust with me as the beneficiary? That way I can essentially 100% this deal while the bank thinks they are only financing 80%.
If it would be a pain to give myself the 20K, could I just write a 2nd mortgage for 20K from the trust to my LLC and then tear it up once the double close is over?
This is my rough understanding of creative financing. I would appreciate any help you could give me on this as I would like to offer and get this deal locked in…I already lost another because I sat on it too long.
If I have been paying attention on here I would have to say your not getting a good deal here.
If you apply the 2% rule for purchasing you should be buying for $40K or less.
If you bring your loan to $100k thru your sale to your LLC (don’t know enough if this could be done) it seems like you are going to lose what ever cash flow this property might have now. I would think your mortgage on $100K would exceed 50% of your gross rent or pretty close.
I know that does not answer your question, but it does not seem like a great deal.
If my gross rents are 1800 a month, that means my purchase price according to the 2% rule should be at 90K. I am trying to get into the property at 82-85K.
I am discussing creative financing. I am basically wanting to do a double closing, where my trust buys it at 82K and “sells” it to my LLC at 105K. The difference between 105K and 82K is money I am paying to myself through my trust. Does this make sense?
I am asking if anyone has experience with this type of double close. I am getting 100% financed by raising the price on myself and “paying” myself the difference.
There is a fine line between creative finance and mortgage fraud. If your intent in the double sale/close is to artificially inflate the sale price to $100k so that you can fool the bank into giving you an $80k loan then I would suggest you are doing the latter.
Good point, I was just pinging the idea off everyone because I read the same scenario in a creative financing book. Definitely don’t want to go to jail…
If I just paid the downpayment in cash to the trust, and then that money came right back to my LLC because the trust is the beneficiary of the LLC that is legal though right?
I can understand writing a second mortgage and then tearing it up being illegal.