I am trying to understand how I could make a deal work if I had a private lender that would help me finance a deal.
For example, I find a property to purchase for $100K that is appraised at $175. At the closing, I would have my private lender purchase the property in full, $100K cash. Then, with the equity, I would want to refinance with a bank, pay my lender points, and put the property in an LLC that I would own.
Is this possible and/or legal to do? If yes, what would need to happen to have the private lender purchase the property and put it in my LLC?
It will depend on your credit how much you will need to put down to get a private lender to look at the deal. Normal the banks/lenders will not let you finance the home in a LLC and if the did they will attach your personal name and credit to it. To many people are trying to put finance homes in a LLC to distance themselves from taking personal responsibility in case anything went south the banks are wise to that game.
You would purchase the house in your name, with a lien from your private lender, he may or may not require you to have a downpayment, but will just about definately want you to pay closing cost which will include about 4 points to your private lender.
You can’t to directly to a bank and refinance for $175k, they will say the house is only worth $100 because thats what you paid for it,you must do some type of rehab work to explain the difference, and if its truely a house that should be worth $175k and you can get it for $100k, it will need some type of workm even if its just paint and flooring
After you have rehabbed it, then you can finance it based on a new appraisal, normally 75% of that appraisal, you will have to pay for the new appraisal and closing cost again,
You will want to have pictures of the house when you first bought it and after the rehab, that way if they question why its worth more than the $100k you paid for it a few months ago, you can show them the improvements
Thank you both for your feedback!
Andy - Is there a certain amount of time I would need to wait before trying to refinance? Also, just to be clear, I would want to plan 4 points for closing alone in addtion to the remander of the agreeement?
in the Dallas area most hard money or private money lenders charge 4 points,but it varies,
We are trying to refinance a deal right now that we have only been in 45 days,the lender may require 90 day seasoning (I had one last year they wouldn’t approve until the 90 day mark),but we are trying it to see,different lenders have different rules in addition to fannie guidelines