Refinance from my name to an LLC??? "I am sure BP can help"

9 Replies

Hello BP, 

Our contractor is wrapping up the rehab on our very first BRRRR and I was wondering what would be the best way to get the property transferred from our names to our newly created LLC. We still have to refinance the property for its ARV, so I was hoping someone with more experience could answer the following (these may all be questions for the financial institution but I thought I'd ask since we are still looking for one:)

1. Would it be possible for the home to be refinanced for a mortgage under our LLC with the new lender, or would we have to do a quit claim deed and transfer before we refinance?

2. If we wanted to take a out a HELOC against the property, should it be in the under the LLC first or could the transfer be done during the HELOC process? We prefer to do a HELOC over a cash out refi.

3. The property was purchased this year, if we do a quit claim deed transfer, would this be considered a taxable event for federal taxes? If so, would it be taxable to the LLC or to us personally?

Thank you for you assistance, please feel free to PM me any recommendations. 

I wouldn't start worrying about your property ownership until talking to banks and knowing your options moving forward. They may be able to get creative based on your specific situation. Having the property in your name shouldn't be a big concern if your assets are limited and you carry the proper insurance. If you get to a point that the bank will need the property in your LLC, they will help you through that process. Not so easy if they come up with a personal loan option and you have already transferred to your LLC......

This is actually a question I had because I was told that I am not able use an LLC when purchasing a conventional loan, but I can do a quit claim deed after I own it to an LLC. What are peoples thoughts on this, and has anyone ever seen the "due on sale" clause executed, and would this even apply? Thanks in advance for the help!

Originally posted by @Diana Jing :

This is actually a question I had because I was told that I am not able use an LLC when purchasing a conventional loan, but I can do a quit claim deed after I own it to an LLC. What are peoples thoughts on this, and has anyone ever seen the "due on sale" clause executed, and would this even apply? Thanks in advance for the help!

Some lenders do and some lenders don't. I'd do the research for yourself and determine if its right for you. There's a lot out there on this subject. At the end of the day the bank WILL have the authority to call the loan so watch out. 

Here's a good thread on the subject: 

https://www.biggerpockets.com/forums/311/topics/154927-due-on-sale

 

This might be helpful information @Diana Jing and @Craig Clark . Link to Fannie Mae "Due on Sale" exemptions with transfer to:

a limited liability company (LLC), provided that

  • the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and

    the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).

Here is the link: https://www.fanniemae.com/cont...

@Craig Clark

If the property is in your LLC, than you can not refinance with conventional. The property would have to be put back into your personal name for the refinance. 

There are LLC options with portfolio lenders, but the rates are going to be higher than conventional. 

A HELOC will be very difficult to find for an investment property. 


@Jerry Padilla   

Thanks Jerry.  I will do some searching to see what I can find.  We are still in the seasoning period and looking to get a refi asap to move to the next property.  If we have to keep it conventional under our name it's ok.

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