Hello Bigger Pockets Community (Newbie Here),
My business partner and I are currently looking at purchasing our first investment property in Detroit, MI. We will be using the BRRRR strategy, so buying the property for cash and then rehabbing. Before we close on the deal we want to understand the best way to go about this, as we plan to refinance after the rehab.
How will purchasing the property through the LLC impact refinancing?
Welcome to BP
Structure is really important here. Using cash is great, but you'll still have to wait for a 6 month seasoning period in order to use the appraised value and cash out the property. If that doesn't matter, you're in great shape. Otherwise, consider using a hard money lender to carry the bulk of the cost and cash out after the seasoning period and after the property is stabilized and all construction is complete.
Depends on the type of loan you plan to get.
1) If commercial loan, no impact. Just understand you will still have to personally guarantee with most lenders.
2) If you're planning on a conventional mortgage (FNMA/FHLMC/FHA/VA) then you will be required to transfer the property into the name of the person getting the mortgage right around when you close on the mortgage. Then you can transfer it back to the LLC after the mortgage closes. You do want to be careful with transferring the property back and forth from personal name & LLC in regards to possibly creating taxable events. Please speak with a tax professional.
Be sure to check out our blog here on BP and the blog on our website, as most everything we write is about the Detroit market. We've even started a Deep Dive series on suburban cities and Detroit neighborhoods.