BRRRR and Holding Properties in a LLC

7 Replies

I am having some problems with the BRRR strategy, particularly with having my first property in the name of a LLC.

It seems that the banks in my area won't (can't?) refinance the property unless it is under my personal name. Since it is held under the name of a corporation, then it has to be done via commercial loan. Is this standard?

If it is, would I be better off transferring the title back into my personal name so that I can do a standard refinance? Or are there any loopholes or counter-strategies to get around this?

Thanks!

@Alex Huang if you are getting a standard fixed rate mortgage, then yes it needs to be in your personal name. That is an underwriting requirement. Otherwise you need to get a business loan which will most likely have a higher rate. A business loan may be hard to get if the LLC doesn't have credit history. The low rate programs that are the Freddie and Fannie backed loans were designed to promote home ownership by individuals.

Originally posted by @Joe Splitrock :

@Alex Huang if you are getting a standard fixed rate mortgage, then yes it needs to be in your personal name. That is an underwriting requirement. Otherwise you need to get a business loan which will most likely have a higher rate. A business loan may be hard to get if the LLC doesn't have credit history. The low rate programs that are the Freddie and Fannie backed loans were designed to promote home ownership by individuals.

 Thanks

Is there any penalty or disqualification of eligibility if I just get the property back under my personal name so I can use a standard refinance?

If you are using conventional financing there are some lenders that will allow you to purchase in the name of the LLC if you and anyone else applying (like a spouse) are the only shareholders. I know one in California but not in Ohio unfortunately.

Originally posted by @Alex Huang :
Originally posted by @Joe Splitrock:

@Alex Huang if you are getting a standard fixed rate mortgage, then yes it needs to be in your personal name. That is an underwriting requirement. Otherwise you need to get a business loan which will most likely have a higher rate. A business loan may be hard to get if the LLC doesn't have credit history. The low rate programs that are the Freddie and Fannie backed loans were designed to promote home ownership by individuals.

 Thanks

Is there any penalty or disqualification of eligibility if I just get the property back under my personal name so I can use a standard refinance?

You can just deed it back to yourself and take out the loan. Keep in mind that personal mortgages have clauses that prohibit transferring ownership of the property. If the bank asks if you plan to deed it back into the LLC after closing, the right answer is NO.

Remember if you have an LLC its a company not a corporation.

Why is that important?  Well you need to be careful with the transfer of ownership between yourself and a company that is owned by, you guessed it yourself.  Make sure you have honest open conversations with these people.  If you're looking for financing and are trying to switch ownership now they may think that could happen again.  Although most banks don't have the time nor inclination to pursue potential due on sales clauses that doesn't mean they won't try avoiding it in the first place.

If this get's too sticky consider finding more regional banks and make friends with your portfolio managers.  These are the people that will make or break your finance opportunities and you would be shocked at what they're willing to do when you make good on your word.

Originally posted by @Nick Ferrari :

Remember if you have an LLC its a company not a corporation.

Why is that important?  Well you need to be careful with the transfer of ownership between yourself and a company that is owned by, you guessed it yourself.  Make sure you have honest open conversations with these people.  If you're looking for financing and are trying to switch ownership now they may think that could happen again.  Although most banks don't have the time nor inclination to pursue potential due on sales clauses that doesn't mean they won't try avoiding it in the first place.

If this get's too sticky consider finding more regional banks and make friends with your portfolio managers.  These are the people that will make or break your finance opportunities and you would be shocked at what they're willing to do when you make good on your word.

To add to what Nick said, you want to make sure that how you have your LLC taxed is appropriate as you can create a tax situation by changing title on the building.

So to follow-up here, is my best play to:

1. Quit Claim Deed the house to my name, refinance, then once the refi is closed, I can do another Quit Claim Deed back to the LLC?

OR

2. Go through the formal process (through a title co.) and get the house back in my personal name, get the refi, then Quit Claim Deed to the LLC?

Or something else?

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