Equity Stripping A Scam?
I've read about equity stripping as the tool to protect your real estate investments. One of the methods of equity stripping is to use a hot company to hold your real estate and a cold company to extend a mortgage to the hot company that is equal to the equity of the real estate in the hot company. If it needs be, the cold company can foreclose on the hot company's real estate to protect from judgments against the hot company. Does this work? How will the IRS view the legality of the cold company?
We have acompany set up as an absolute seperate business that places a line of credit (like HELOC) on the property that way if you pull up the property it shows a HELOC and there is less than 1% equity. Not something an atturney would touch. This is totally legal and easy and cheap. The "lending company" is a Nevada corp so you can not tell that is our business anyway. Just another way to handle this.
Sire