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Brian Higa
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  • Investor
  • Hemet, Ca
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LLC Refi????? Explain It to me as if I were a 5 year old

Brian Higa
Pro Member
  • Investor
  • Hemet, Ca
Posted Oct 16 2017, 23:53

Ive been trying to get unstuck and researched the BP Site

Family members purchased some investment RE with cash

We now want to put a loan on the properties but havent found any real long term (fixed rate 15 to 30 years) options being held in our LLC

Can the LLC give me a loan personally that I can then refi with a bank? Or how do I get the money out of our 100% cash purchased property?

Also, we have a total of 6 doors. Two Duplexes, Two SF homes. If all held in the LLC can this qualify for commercial financing?

Thanks for any help getting me unstuck

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Soh Tanaka
  • Property Manager
  • Lindenhurst, IL
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Soh Tanaka
  • Property Manager
  • Lindenhurst, IL
Replied Oct 17 2017, 03:58

I'm not necessarily recommending, but what some people do is to transfer the title from LLC to yourself, refinance, then transfer the title back from yourself to the LLC. After you do that, technically the bank can come at you and ask you to pay off the mortgage, as you transferred the title, but I never heard or read of that happening.

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Christopher Phillips
  • Real Estate Agent
  • Garden City, NY
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Christopher Phillips
  • Real Estate Agent
  • Garden City, NY
Replied Oct 17 2017, 04:03

Brian Higa

Your only choice with an LLC is commercial financing. Usually 5 year or 10 year terms to get the better rates. Going 15+ will increase your rate since banks hold the commercial loans on their books and they don’t like holding loans on their books too long due to the risk.

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Ryan O'Mara
  • Financial Advisor
  • Des Moines, IA
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Ryan O'Mara
  • Financial Advisor
  • Des Moines, IA
Replied Oct 17 2017, 05:00

You can get commercial financing on all those properties and the lender will prefer you have them titled in a corporate entity.  There are 30 year fixed options available.  If all the properties are in the same town/state you may be able to do a blanket loan with all included.

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Brian Higa
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  • Hemet, Ca
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Brian Higa
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  • Investor
  • Hemet, Ca
Replied Oct 17 2017, 10:02

Soh Tanaka:  Thanks for the response.  Ive considered that but the problem that I think I will face down the road is because the refi is under me personally, i will limit the amount of times I can do this.  My belief and experience has been I can only get so many personal loans as the lender ultimately looks at me as the financial backing VS commercial loans where they look to the property and cash flow as the backing.  Ive heard this many times onthe podcasts but need the details on how to execute

Ryan O'mara - Do you have a contact or a suggestions? All the properties are all in the same town. I think Ive approached every small bank in town (theres not many) trying to get commercial financing as all six doors - 4 different roofs are titled under the same LLC. That was my thought when I first set the LLC up but am having difficulty executing this. All are owned free and clear. Ultimately I want to be able to (1) Execute the "Repeat" in the BRRRR strategy and (2) Equity strip for Asset protection. Everyone I have spoken have given me the 3 year fixed, then adjustable option.

Thank you for attention and response.  Any personal experience or professional references / consulting service appreciated

Brian

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Brian Higa
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Brian Higa
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  • Investor
  • Hemet, Ca
Replied Oct 17 2017, 10:08

Christopher Phillips - Thanks for response. Do you know banks that will do 15 year loans? You mentioned a higher rate but I would consider a higher rate for the longer term. I would just figure the costs of the loan / debt and figure what my bottom line is. My problem is I havent found any Bank willing to loan to an LLC with any longer term, fixed rate financing.

Thanks again

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Russell Brazil
  • Real Estate Agent
  • Washington, D.C.
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Russell Brazil
  • Real Estate Agent
  • Washington, D.C.
ModeratorReplied Oct 17 2017, 10:10

LLC's must use commercial financing, which is almost always an adjustable rate loan. If you want a fixed rate loan, the property would need to be owned by an individual as opposed to an LLC

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Jeff Copeland
  • Real Estate Agent
  • Tampa Bay/St Petersburg, FL
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Jeff Copeland
  • Real Estate Agent
  • Tampa Bay/St Petersburg, FL
Replied Oct 17 2017, 10:21

As an individual, you can generally have up to 10 Fannie/Freddie backed conventional residential mortgages. 

Most investors find the financing is so much easier and cheaper, that it makes sense to hold title in your own name until you hit that mark (and use insurance, rather than LLC, for asset protection), then look for more creative options and/or commercial financing. 

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John Broussard
  • Lender
  • Houston, TX
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John Broussard
  • Lender
  • Houston, TX
Replied Oct 17 2017, 13:29

There is financing available for LLC's 30 yr fixed terms and 3 - 5 - 7 year Arms. Most of the loans are Stated Income, No Ratio Loans that are based of off the debt service. You also have Blanket or Landlord Loans available for portfolio's.

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Brian Higa
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  • Hemet, Ca
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Brian Higa
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  • Hemet, Ca
Replied Oct 17 2017, 14:18

John Broussard

Do you have Banking contacts to provide a 30 year for an LLC?

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Alex Riley
  • Contractor
  • Lisle, IL
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Alex Riley
  • Contractor
  • Lisle, IL
Replied Jan 27 2022, 10:26

Brian Higa, What did you end up doing? We have a similar situation I am trying to get unstuck off and get some cash out for more investments. We purchased a house for cash under LLC name. We live in it and we are fixing it up and will resell it at the right time for us. So commercial loan wouldn't qualify, since we are living in it. We would like to refinance but we would like to keep the house under LLC. Is this even possible?

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David Kelly
  • Lender
  • Nationwide Lender
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David Kelly
  • Lender
  • Nationwide Lender
Replied Jan 27 2022, 11:10

@Alex Riley Fannie Mae or Freddie Mac conventional options require the property to be in your personal name to close. This would mean that you can do a simple Quit claim deed to your personal name and then back to the LLC after. This is an option but would suggest doing your own research on the potential negatives. Conventional loans with Fannie/Freddie will have your best low rate terms at a 30 year amortization. If you go thru a commercial lender the terms will be shorter and at a higher rate in most cases, with possibility of a balloon payment. Its not as attractive. You can have up to 10 loans per person - so if you are married that would be 20 total (assuming you both can afford this many loans per DTI regulations). I work with the conventional route, please reach out if you would like to discuss the process.