Refinance in an LLC

12 Replies

I recently completed the rehab on a 4-plex I bought this spring using a commercial loan and am not looking to refinance into a traditional 30 year fixed note. However, every lender I have spoken to has told me they will require me to deed the property out of my LLC and into my personal name before they can refinance it, at which point I will deed it back into my LLC. Every other rental I have had and refinanced was in my personal name, and I only started up my LLC the beginning of 2014.

How does this make sense?

Is this a common practice?

Banks will not offer financing to your LLC, thats just how it is.

You will need to do exactly what you stated, transfer to you, refi then quit claim to your LLC.

Banks want to finance in your personal name just in case anything goes south, they have someone to come after other then an LLC.

Joe Gore

What is the "Portfolio Lender" concept then?

I thought I can put my rental properties in my LLC neme, and then when needed, I can

cash out using a portfolio lender, so that I can pump that money to acquire new properties?

Could some please enlighten me on how to leverage my money this way, as after buying

few properties, I will be cash trapped, if I can not refi easily to free up my cash!

Any reco for investor/LLC friendly portfolio lender in IL & IN?

Hey @Gautam S. ,

You are correct in having the properties in your LLC for liability reasons, however when you go to refinance the properties you will have to transfer them using a warranty sale deed to your personal name, as the bank will not refinance a home owner by an llc. Once the refinance is complete, redo the warranty sale deed and transfer it back to your llc. It is actually a very easy process and only costs the money for the county to record it.

@Mike Sattem

You forgot to say the lender could call the note do if you transfer to an LLC and just because the gurus teach everyone to hide your property in an LLC will not protect you, but an insurance policy will.

Joe Gore

Or you could go the hard money route. That's the only other way to refi in your LLC's name.

I understand that this is the recommendation that everyone give, but I have 2 issues with it:

1. Lender can call  your note if the individual is no longer the title holder

2. There is something called piercing the corporate veil which removes the liability protection from an LLC if certain conditions arise. This type of transfer seems like a slam dunk case for piercing the corporate veil to me.

Disclaimer: I am NOT a lawyer and I don't even have real estate investments yet. However, I have taken courses in business law and the above are my concerns. This is definitely not advice, but I'd make sure you're comfortable with the points above before transferring title in and out of an LLC.

Good point @J V.  

I think folks are not familiar with "Commercial Loan" from Portfolio lenders.

Banks give loan to LLC based on Debt Service Coverage Ratio.

No need to hold the title in your own name ever.

You need to find the right bank. Banks have lent to my LLCs before, even for small (<$50k) mortgages. The one I deal with primarily serves the local Amish community, so very few of the mortgages they write are conforming to Fannie/Freddie guidelines (for some reason, they don't like lending on houses that have no electricity or indoor plumbing!)

@Mike Sattem Just closed on a business loan for rental that was deeded to my personal name. The credit union actually had me deed it to my business, and the loan was made to my LLC. 5%, 20 year amortization, 5 year balloon, 80% LTV (after they told me the max was 75%). It was exactly what I was looking for. They're out there.

@Mike Sattem  

If you do go the conventional route you should be able to switch the deed at the closing.  That way if you change your mind you didn't waste money on the Quit Claim Deed.

So while you have a loan on the property you can deed it back into the LLC and the banks don't mind?

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