I need your help and opinion on this. I'm looking for some financing for a rental property without having to come up with 20% down. I talked to one of my mortgage brokers, who also does HML. He said that he has the perfect situation for me. He said that hard money is getting harder to get and some of his hard money have started to dabble in another thing. This is what he told me they are doing.
Let say I want to get 200k for a home. The company he does work with will find a company that has quit doing business for whatever reason (it will be a clean company) and buy it. They will then in turn sell it to me for let's say 15k. I will then become CEO of that company. Then he says they will get you a line of credit from a bank for the 200k. He said there would be $1500 dollars for the paper work before hand. 2 points for the loan. The interest rate would be the prime rate. and it would only be an interest only loan. And of course you only pay interest on the amount you use.
Here's an some questions I asked in an email I had with him yesterday. I'm gonna have a conference call with him and his company later.
Q. Who's giving out the line of credit? Bank or Private investor?
A. It is a business line of credit. It is NOT a private investor. It is a bank.
Q. Obviously is it legal? I don't want to get caught up in a fraudulent thing.
A. Yes, it is legal and all papers signed are legal. You can have whatever you need checked out checked on.
Q. How's the company thing work again?
A. It's a company that's not doing business anymore. They sell the company to the company we work with for a dollar amount. ie. 15k. Then the company name etc. is your company and you are made the CEO or President. The company that is purchased, for whatever reason has quit doing business,but they have a clean slate with no problems, no derogatory issues, judgements etc..
He says they get the company info from Dunn and Bradstreet.
Please let me know what you guys think of this. If it is legit, it might help everyone out. If it's not I'll know to stay away from it.
Hopefully I'll get more info later this week.