Should I transfer title to my name for better financing?

Question

Hi,

I have a rental property in Texas with a 75k private loan. Property is valued at 145k. I'm looking to do a cash out refinance on the property. It is currently in my LLC and all the lending choices I have come across so far have been kinda crap compared to conventional. Best choice so far is 80% LTV, 15 year am, adjusts every 5 years at 6.5%.

Should I transfer this property into my name and get conventional? (I'm not near the limit and would easily qualify with DTI). Are there banks out there that don't require a seasoning period, or one less than 6 months, since my private loan is due in 5 - 6 months.

Also, what is the best way to transfer title to myself? warranty deed, quit claim deed? Can I do this on my own or do I need an attorney or title company?  All in West Texas. Any lenders in the state I would love to chat. I've spoken with 8 banks locally so far.

David Dachtera · Answer

@Logan Turner,

Here's what you need to watch out for ...

Interest rates remain at historic lows. Barring other factors, these are due to rise which will impact the value of commercial income property. When ever your note comes due, you need to consider how much equity you can reasonably expect to have at that time as that will determine your ability to refinance without bringing cash to closing.

Food for thought ...

Justin Farrell · Answer

@Logan Turner I lend in Texas for a large company. It is very difficult to take cash out on a mortgage if this is your investment property. The loan size and the adjustment for the rental property will usually make a 30 year conventional loan impossible. Even 15 year mortgages on an investment property is very difficult when taking cash out. You will not be able to exceed 3% in cost on the loan due to Texas 50a6. Points and fees/state high cost are usually a killer in that state.

Austin Hughes · Answer

I've heard from some investors that they just kept talking to as many banks as possible until they found the right one. Give it a shot!

Kenneth Garrett · Answer

@Logan Turner

My properties are in LLC's.  I use commercial loans and have been able to get between 5 and 5.5%.  Amortized over 25 years with a 5 year balloon.  It is true, you can get a better rate on a residential mortgage if it is in your own name.  I like the asset protection of an LLC.  I don't think its worth the liability regardless of how much insurance you have.  Remember its a non-owner occupied building.  Try small local banks.  Stay away from the large banks.  The smaller banks are more willing to work with you.

Good Luck.

Chuck L. · Answer

Hi Logan,

@Logan Turner

@Ronald Rohde

What did you end up doing? I'm in a similar position. My properties are under a LLC and need to change the titles to my name in order to cash out refinance. I'm through the appraisal process with my bank.

Determine the best way to change titles from an LLC to my name?

Is there a way to change the title from my name back to the LLC after the loan is giving out?  or after the loan you can't have liability protection?

Seth Hayes · Answer

The biggest drawback is the liability protection you get from your LLC. You really just have to put a price tag on your peace of mind. If you wish to transfer it back to your personal name, you may want to consider moving it to a land trust and making yourself the beneficiary. This won't provide the protection of an LLC but it will provide a little bit of masking when people start digging to see how many properties you personally own to determine how big of a target you are.

Logan Turner · Answer

So far what I've learned:

Most companies will treat my SFH as a commercial loan if the property is in my LLC.

If I want better terms then I need to switch it to my personal name.

Every place so far ive spoken with requires seasoning 6-12 months.

I may pay off the 75k private mortgage and then wait a few months and finance it in my personal name. Which I could hopefully get a fixed 30 year mortgage and take out a loan for 75% LTV giving me a check for around 105k.

Any drawbacks to this?

Logan Turner · Answer

@David Dachtera

Great point. I am hesitant with 5 year balloons for that very reason.

This is a low money deal though. SFH, loan would only be about 100-110k.

Ronald Rohde · Answer

Probably just need a title company attorney for the deed work.

Kenneth Garrett · Answer

@Logan Turner

Yes expand your area of banks.  Smaller banks have a limit maybe 50 miles from  the property so it may take a few tries.

Keep trying.

Should I transfer title to my name for better financing?

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