LLC cash out refinance

26 Replies

My friend/business partner and I purchased a two family investment property using seller financing about a year ago. It's a 50/50 split partnership. I recently inquired about doing a cash out refinance and was told it can't be done because we are in an LLC and it's a 50/50 split. It can only be done if someone is majority owner (51% or more) or we change the way title is held. We can refinance the house but cannot take cash out. We need the cash in order to purchase our next property. Does anyone know if this is accurate information and if so, any insight on how to handle this situation. Are there other options or alternatives? Two factors to consider, We are not apposed to refinancing out of the LLC and a HELOC is not an option because there is a time limitation on the refinance, which is fast approaching. Thanks in advance for any help!

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I am in a similar situation and have heard that most lenders simply don't allow an LLC to do a cash-out refinance, and I was told that I'd need to get a portfolio loan using my property(s) as collateral. When I spoke with local credit unions around Detroit (where my property is located), they wouldn't lend to me because I am out-of-state.

I spoke with Bank of America, where I do the bulk of my banking, and they want to see $100k in annual revenue + 2 years in business to consider me for an unsecured business loan and $250k in revenue for a secured loan.

Can anyone recommend any sort of financial institution that would allow an LLC to do a cash-out refinance? I think BP rules prohibit posting of that info, but please DM me if you have a suggestion.

Many thanks, and @Rebecca Williams , I will keep you in the loop.

You shouldn't have any problem refinancing the property under your current structure. It sounds like you're just not talking with the right type of lender. I would suggest calling on a local community bank or Non-QM lender. 

@Brian Kantor from what I've been seeing, most banks are being very conservative right now and not doing any cash outs. They are happy to do rate and term refinances, but not allowing any cash outs. 

My guess is that a lot of banks have set floors with treasury well below that. So banks have much more incentive to lend and borrowers are still getting historically low rates. It's a win win. The downside, is banks are able to pick and choose what business they want to do. They can do business on good margins without having to leverage their portfolios too much by just doing rate and term and they have enough demand to just do that. 

What you may want to look at is doing rate and term with a credit union, then once the finance industry starts to go back to normal, you can refinance and get your cash out. The reason I say credit union, is that they don't charge pre payment penalties. The only thing you'd have to be wary of is burning bridges at a credit union. 

Thanks, @Kyle Altenau . If my goal is to access available capital to fund the purchase of another property, how does a rate-and-term refi help with that? I currently own one rental property free-and-clear. Thanks again.

Yeah best bet is to call alot of local banks and credit unions....I agree with some of the investors.. the banks are making of new rules as we navigate through the pandemic and cash out refi's are taking at min about 90 days...thats what I have been experiencing

@Rebecca Williams

I would sugggest caution and talk to your attorney. If you change title to your personal name, let’s face it— anybody could refi that for you. It’s a regular conforming loan. The loan officer know how to do that, and chances the person whom you are talking to really has a sales job without a fiduciary responsibility to you.

Its been chatted about on bp of why one even needs a LLC in many real estate investment situations. Also, so has the situation where you are creating where ultimately Title will be held by the LLC but the loan by a person. Looks like there are ways to get it to legally flow, but seems to have some risk to me

Another issue I have, just my layman's opinion which I haven't heard different here and anywhere else, this is just another way to pierce your corporate veil which invalidates the whole point of having a LLC. By flopping Title back and forth for more favorable loan terms (especially if you do it more than once) makes the LLC look like your "alter-ego" in my opinion.

Sure lots of people do it. Lots of people do lots of things, some have been called out on this forum. Yet, my pet peeve is I haven’t heard of anything having the opportunity to stand up in court. That’s great for people not to get sued, but that doesn’t help figuring out how to do it right, unless one likes the idea that ‘ignorance is bliss.’

Good luck. I hope it works out for you.

@David M.

I've been told by multiple lenders that I have to refinance out of the LLC to get cash out so the options would be to keep it in my name or put it back in. Sounded like this was the norm. I'm learning as I go so thank you for the insight and advice.

@Rebecca Williams

Not to be wise ***, but it’s normal for them to sell you what they can. They aren’t looking at the bigger picture, ie your overall legal and financial interest.

I think your mentioned about lenders being super busy and running for the hills. I would have figure it would only be the residential lenders that are super busy.  Commercial real estate was weak coming into Covid-19 and are a wreck now

So, have you been talking/seeking commercial lenders? You need a commercial lender for your LLC.

Also, I’m guessing your “seller” doesn’t have any additional cash to loan you?  Basically, cash out refi with your current lender, the seller...


Hope this helps. Good luck 

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Thanks, guys. I am scheduling a call with a lender that specializes in loans for real estate investors both in LLCs and your own name. Once I get some feedback there and gauge how legit this seems, I will post here with general feedback. If positive, I will DM whoever wants with contact info. Just want to do a little research first.

@Rebecca Williams , you are looking to solve a commercial lending problem with a personal lending solution. If you want to transfer title into your personal names, you will get a conventional product. Commercial interest rates are about a point higher and often have a shorter amortization period, such as 20 years. The LLC often does not have 2 years of income and a tax return. Talk with your CPA before transferring title and report back what you find.

@Rebecca Williams

Search for local banks that do "in-house" lending. I'm in an LLC with two other equal partners and we just did a cash out refinance on a couple of our properties. Ended up with 80% LTV, 25 year amort, 3.6% interest, 7 year balloons. Of note; we refinanced with the same bank that already held the mortgages, and all three partners signed personal guarantees on the loans.

Hey, @Jordan Perryman . Not ready to pull the trigger on anything yet, and still doing research, but I did find a couple options. 

Quorum Federal Credit Union would do a HELOC on a property owned in an LLC and let you borrow up to 80% of your equity. First 5 years are interest-only payments. Also, if you have two or more properties in an LLC (not sure if needs to be in same LLC), they will do a cash-out refi on one of them using the other as additional collateral. 75% LTV. I spoke with Tiffany Mazzoccoli over there.

I also spoke with @Alex Bekeza at BRRRR Strategy Funding, who will do a cash-out refi in an LLC for a loan value of $100k+ at 70% LTV (aka, an ARV of ~$145k+ minimum).

Keep me in the loop with what you decide as the more info I can get, the better.

@Brian Kantor

Any updates to your cash-out refinancing of your LLC property? I am about to close on a residential property that I am still debating to out it under my name now and risk DoS following transfer to an LLC or just put the property under my LLC now and deal with the cash-out refinance part. Trying to pick the lesser of the 2 devils!