The small company I work for does Bridge loans, non-owner occupied loans and hard-money loans. My boss had an investment property (SFR) that he was about to seller-finance to a guy. Lets call the guy A. Guy A during the process of buying the property said can you give me a loan to fix this home up and bring the value up? They discussed and came to a deal where guy A will fix the home up using the loan my boss provides and after the rehab he will sell it. Guy will use the proceeds from the sale to pay off the rehab loan to my boss and whatever is left over, they will divide it equally between them – Guy A and my boss.
Boss says to me to tell title to start title commitment process. In the middle of me giving title instructions he tells them how to structure it:
This is what he told title: Deed is still in my boss’s LLC call it LLC B Owner will stay LLC B Borrower is also LLC B Lender is LLC D (also an LLC owned by my boss as the sole manager) We will assign the note to “assigns of LLC D” who is basically the true investor / lender who is lending money to my boss. Guy A will sign a personal guaranty to repay the loan
He instructed me to get loan docs made that have a note and mortgage with lender as LLC D and Borrower as LLC B, both owned and managed by my boss so literally he will be signing as lender and borrower? How is that even possible/legal?
The true borrower (guy A) is not on the deed/note or mortgage. What is his motivation to ever pay the loan?
I dont know how to explain this to my boss.
He wants to do this to keep control of the property but how will this ever work?
What would be a better way of structuring this deal?
Hope this is not too confusing. Thanks.