Can I personally purchase a house from my LLC

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Can I personally purchase a house from my LLC

Logan Turner
Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
Ok weird question everyone, but I made the mistake of purchasing the last house into my LLC. So now I'm only qualifying for commercial type lending when I still can get more Fannie Mae loans (lesson learned) Transferring the title from my LLC to my own name will take about 6 months to season before I can do a cash out refi. I have 85k tied up in the deal. So I want to get it out to re-invest. Can I purchase the house in my own name, from my LLC, using a lender 30 year fixed rate financing? 
Assume i sell it for fair market price, and with 20 percent down, pay title insurance, appraisal etc. will a bank allow this? If not, am I able to sell the house to my Dad, who is not affiliated with the LLC in any way?
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Jared Bouzek
Lender · Denver, CO · Member since 2015 · 404 posts · 227 votes
9y

@Logan Turner This is somewhat of a quirk in conventional underwriting guidelines, but I do know of a lender who will do a conventional Fannie Mae backed loan in this scenario if you are the 100% owner of the LLC and you quit claim the property into your personal name. They will allow you to cash-out under these circumstances with no seasoning. I have never run across another lender who will do this, because 99% of lenders interpret the guidelines to say you must season for 6 months. I know they will do it because I closed a loan about 2 months ago with this exact scenario here in Colorado and I'm about to do another one. Perks of being a broker. ;)

I'm not licensed in CA, but I may be able to hunt down a broker connected with this lender who will do the loan for you. Can't guarantee anything, but shoot me a pm if you want me to do some research for you.

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  • Robert Sepulveda
    Lender · Newport Beach, CA · Member since 2013 · 264 posts · 97 votes
    9y

    @Logan Turner, From my experience, you can get your homes purchased through the LLC, however, you're usually not going to get a 30 year fixed.

    Private money will get you 1 to 5 year terms (typically) with simple qualifying and usually interest only between 7% and 12% rates.

    Portfolio loans will allow you to do a longer term and get better qualifying terms for better borrowers. But you'll typically get 2, 5, 7 or 10 year terms with around 6% to 8 % rates. First key used to be the only one who provided long term fixed loans, but they switched to being a note buyer instead of a lender.

    Your conventional loans will all require you buy in your name. Maybe someone else may have a niche lender that can chime in, but that's my 2 cents.

    0Reply
  • Robert Sepulveda
    Lender · Newport Beach, CA · Member since 2013 · 264 posts · 97 votes
    9y

    @Logan Turner

    Sorry, forgot your other question. No you can't sell to yourself anymore. But you can find a lender who will will not require 6 months seasoning if you are the sole member of the LLC. You'll just pay extra for the title work and they can record you out 1 day prior to funding, then record the note in your name.

    Let me know if you need more details.

    1Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Robert Sepulveda

    Thanks for the reply. I think you misunderstood my first post. Let me try and see if I can explain it a little bit better. 

    I own an LLC and the deed is in the name of the LLC. Could I, Logan Turner, the individual purchase the house from Permian Homebuyer LLC (Logan turner owns).

    So Permian Homebuyer LLC sell house for fair market, appraised value, to Logan Turner. Say house is worth 150k. I sell it to myself for 140k. I put down 28k plus closing costs. And finance 112k for 30 year fixed. Now Logan Turner owns the property with fixed conventional 30 year financing.

    Permian Homebuyer receives the check for 140k -closing costs - current lien.  The check goes into my business checking account. 

    0Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    Disregard above post. 

    Im looking for a bank that will waive seasoning for a cash out refinance. So far 0/5. Any suggestions? I've tried credit unions, local banks and big banks (us bank, chase etc)

    0Reply
  • Robert Sepulveda
    Lender · Newport Beach, CA · Member since 2013 · 264 posts · 97 votes
    9y

    @Logan Turner

    Got yes, I understand what you're trying to do. I've done it in the past, however, that was before regulations were put into place after the mortgage crisis to prevent that. You can move the asset from one ownership to another ( i.e. move in and out of an LLC, trust, or partnership) but you cannot sell it to your self from your LLC.

    But, as I mentioned, you can find a lender who will will not require 6 months seasoning if you are the sole member of the LLC. You'll just pay extra for the title work and they can record you out 1 day prior to funding, then record the note in your name. Then you can do a "delayed financing" cash out refinance if you paid all cash for the property at anytime. 

    If, however, you financed the property at the time of purchase, you will have to wait the 6 months anyways from the date of purchase.

    1Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    Great information. Thanks. 

    Seems most lenders I have spoken with have no idea about lending outside of traditional owner occupied residential 

    0Reply
  • Robert Sepulveda
    Lender · Newport Beach, CA · Member since 2013 · 264 posts · 97 votes
    9y

    Yes, I've seen that myself as an investor, that's a big reason why I keep up on alternative financing.

    Happy to help.

    1Reply
  • Jared Bouzek
    Lender · Denver, CO · Member since 2015 · 404 posts · 227 votes
    9y

    @Logan Turner This is somewhat of a quirk in conventional underwriting guidelines, but I do know of a lender who will do a conventional Fannie Mae backed loan in this scenario if you are the 100% owner of the LLC and you quit claim the property into your personal name. They will allow you to cash-out under these circumstances with no seasoning. I have never run across another lender who will do this, because 99% of lenders interpret the guidelines to say you must season for 6 months. I know they will do it because I closed a loan about 2 months ago with this exact scenario here in Colorado and I'm about to do another one. Perks of being a broker. ;)

    I'm not licensed in CA, but I may be able to hunt down a broker connected with this lender who will do the loan for you. Can't guarantee anything, but shoot me a pm if you want me to do some research for you.

    3Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Jared Bouzek

    Just sent you a PM. Would love the help. Property is in Texas. 

    1Reply
  • Lia MartinezPro Member
    Rental Property Investor · Denver, CO · Member since 2015 · 80 posts · 68 votes
    9y

    Hi @Logan Turner, similar to what @Jared Bouzek is suggesting, I also did this exact same thing here in Colorado last year. I originally purchased the LLC to buy the house because the contract was not assignable. It took me a lot of searching until I found a mortgage banker who would do it. Please PM if interested in his contact info, I've since closed 4 more properties with him. The catch was that I could only do up to 80% LTV from the purchase price, not the appraisal price (in my case, very different numbers) if I did the refi within 6 months of quit claiming the LLC.

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    So wait.  Putting little houses inside LLCs isn't always the way to go?    It bungs up borrowing? 

    So in the name of asset protection, we might have problems on the financing side?  Please help spread the word @Logan Turner.  I am growing tired and am but only one of a handful in a sea of 820,000.

    How far into the 6 month seasoning requirement are you?  Waiting it out may save a lot of money in redundant closing costs and maintain the integrity of the title chain.  Good luck with this!

    1Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Lia Martinez i did find a lender able to refinance 75% of the LTV. @Jared Bouzek was awesome and connected me with a broker out of Texas, who then found a lender. 

    2Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Lia Martinez 75 % of ARV. Because I know the difference is quite substantial. I'd like to get the capital reworking for me

    0Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Steve Vaughan i think there is a time and a place for LLC's but definitely not before you've maximized your FMFM loans. Commercial financing is much more expensive. 15yr fixed at 5.25 vs 30 year at 4.4 for example. Plus commercial is only giving me 80% of ARV or cost. Whichever is lower. So a good chunk of money will get left in the deal.

    But hey I hear you man. I think liability insurance plus an umbrella policy is sufficient. My next 7 houses will be under my name. 

    I've owned the property for 9 months. But if I changed ownership to my name, seasoning restarts -per 8 lenders I spoke with. 

    2Reply
  • Rod HanksBusiness Member
    Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
    9y
    In my Mitt Romney voice..."corporations are people too" Yes you can purchase from an LLC but it needs to be an "arm length" transaction which means you cannot be an officer or member of the LLC you are purchasing from. Trying to get around that is mortgage fraud. But speak with several lenders in your area and explain the situation, they may have an alternative solution.
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    1Reply
  • Charles Street
    Flipper · Beaverton, OR · Member since 2015 · 36 posts · 4 votes
    9y

    @Jared Bouzek @Logan Turner  I am in this situation now here in Oregon.. Can you share the contact info with me as well?

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Logan Turner:

    Ok weird question everyone, but I made the mistake of purchasing the last house into my LLC. So now I'm only qualifying for commercial type lending when I still can get more Fannie Mae loans (lesson learned)
    Transferring the title from my LLC to my own name will take about 6 months to season before I can do a cash out refi. I have 85k tied up in the deal. So I want to get it out to re-invest.
    Can I purchase the house in my own name, from my LLC, using a lender 30 year fixed rate financing? 
Assume i sell it for fair market price, and with 20 percent down, pay title insurance, appraisal etc. will a bank allow this?
    If not, am I able to sell the house to my Dad, who is not affiliated with the LLC in any way?

    I have successfully funded a purchase from a Scorporation (files 1120S tax return) owned property by a borrower with 25% down payment (investment/non owner)  from funds in other personal accounts other than the scorporation's accounts. In this specific example the borrower had 8 financed properties so he could not do a conventional cash out with fannie mae but a purchase from his scorporation is in "essence," a work around for a cash out since it returns funds to the scorporation and my borrower owned the company 100%.

    However, on a LLC its different since LLC's are typically taxed as flow through entities going down to your Schedule E on your tax returns.

    When I've asked my underwriters about the LLC purchase similar to the Scorporation above they typically state it would be considered a refinance and limited to rate term refinance or if we transfer it to your personal name we'd need to wait 6 full months.

    However, I have yet to try to purchase from a LLC that files tax as a 1120S or sub chapter S which Im currently waiting to guinea pig this concept to see if it works. Its sort of a grey area to see if the consideration as a purchase stems from the method of taxation or whether if title is held in a S corporation or a LLC.

    Most of these unique scenarios are different takes and if you ask one company or another you will get mixed answers because its in the gray area between the lines within the guide books.

    3Reply
  • Nam Nguyen
    Real Estate Investor · Everett, WA · Member since 2016 · 6 posts · 1 vote
    9y
    I am having the same scenario and would love to have the lender contact. My property is in WA state. Thank you in advance !
    0Reply
  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    If you quit claim the property back into your personal name, and if you have no lien on the property, you can then do a Fannie Mae cash out called a delayed financing loan at less then 6 months seasoning. I am closing one right now for 80% LTV based on the appraised value, but only up to the max. of the original purchase price.

    look into it, maybe even call one of my company LO's in your area to confirm you can do this. 

    1Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    @Charles Street this may help you, based on what Kevin said above

    0Reply
  • Beth WheelerPro Member
    Investor · Wilmington, DE · Member since 2017 · 32 posts · 13 votes
    9y

    Thanks for the good information. I am new and trying to figure all the financing out. As I understand it, I can have up to 10 properties in my name before I have to go commercial. I currently have a primary residence and property that I am getting ready to rent out. I thought I should establish a LLC or company entity of some sort to protect my personal assets, but it sounds like I need to just wait until I reach my 10 properties. I am actually looking at a potential 3rd property now that would be a rental. I know that if I do purchase this property, I will be maxed out from a debt to income ratio. I assume once I get the 2 rentals occupied and start collecting rents, this will change the debt to income ration issue. Is this all correct?

    0Reply
  • Wes Thompson
    Investor · Libertyville, IL · Member since 2013 · 11 posts · 5 votes
    7y

    There is some great information in this thread. I've got 7 investment properties in my name, and have had an LLC for about two years and want to transition them -- but I have insurance on each and an Umbrella policy -- sounds like I'm in an ok spot?

    Everyone talks about how simply Loans can be moved to LLCs, but that's not what I am finding.  For 4 of my properties, the 2 lenders all want to force me to Refinance.  I've got several with significant equity -- which I would like to pull out and use.  They threaten that "Due On Sale" clause.  They are all Fannie Mae (I believe).

    Anyway, thanks for all the posts. If anyone has ideas on tapping the Equity -- or handling the LLC issue -- pls let me know. I can PM from here. Sorry to go a little off track on this thread...

    0Reply
  • Marvin Gavins
    Member since 2018 · 3 posts · 1 vote
    6y

    @Logan Turner So, what exactly did you do?  I am in the exact same situation now.  I purchased home with cash using my llc.  Now I want to use the homestyle loan, to purchase the property from my llc and rehab the property.  Lenders are telling me this is an issue.

    0Reply
  • Marvin Gavins
    Member since 2018 · 3 posts · 1 vote
    6y



    @Logan Turner So, what exactly did you do? I am in the exact same situation now. I purchased home with cash using my llc. Now I want to use the homestyle loan, to purchase the property from my llc and rehab the property. Lenders are telling me this is an issue.

    0Reply
  • Logan Turner
    OP
    Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    6y

    @Marvin Gavins

    Is it owned in a single member LLC? How long have you owned it?

    You could transfer it cash deed to yourself. Then refi if seasoning of 6 months has occurred.

    If not single member LLC you can keep it in LLC and use a bridge loan, or a rehab loan via commercial lender or hard money lender or even private lender.

    What’s your ultimate goal? Hold as a rental? Flip? Occupy it?

    0Reply
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