Hello BP community,
All of you experienced investors who own duplexes tri and quads, are you getting conventional financing (30 yr fixed) for your investments? If so do you form an llc and get the bank to finance an llc investment? I have been told no to an llc financing by a few non commercial mortgage brokers.
So what is the strategy there to protect your assets? Or are there companies out there financing conventional loans for llc that I have not come across?
@Prashant Sharma Unfortunately you can not get conventional or government financing in the name of the LLC. However if you bought the property in an LLC and are using a cash out refinance which has a requirement that your on title for 6 months or more, Fannie Mae will now count the ownership time frame within the LLC as part or all of the ownership time required and will not start the clock all over for you on this.
To get conventional or Gov. financing, you must hold and take the loan out in your personal name. As far as protection that the LLC would give you, I would suggest that a well crafted landlord policy followed by an umbrella policy will cover you much better than the LLC would.
Fannie Mae is by far the best rates and terms available for rental property 1-4 units. So based on that, you want to go conventional on the loan. You only go commercial or portfolio or Non-QM if for some reason you cant get Fannie Mae financing.
Commercial and portfolio gives you a 20-30 year term with a 5 year call or recast, meaning you must refinance or re-qualify for the loan again. That comes with new closing costs every 5 years and a rate that is commensurate with the rates at that time. A 30 year conventional fixed rate, you only qualify for one time and it never adjusts or has a balloon payment.
You can close in the name of a LLC and get a 30 year fixed mortgage, but not in the conventional lending world. There are pros and cons to conventional vs unconventional. Rates going to be higher in the unconventional world but you can turn your money over quicker in the unconventional world and grow faster, as the value seasoning restrictions are less that 6 months to a year. My take - keep your properties under a LLC structure and pay a higher 30 year rate, and take advantage of growing faster, as the cash flow will outweigh the higher interest rate in the long run. I know from experience.
The above comment by Kevin Romines is sound advice.
To answer your question @Prashant Sharma there lenders that will close in an LLC but it's usually non-bank lenders that prefer this model because it's business purpose lending. Rates are higher than conventional, and like Kevin mentioned, Fannie Mae is the best rates/terms.
You can have conventional financing and have the property in your LLC name. At the very end of the transaction in Escrow quit claim the deed into your LLC. The loan will be in your personal name and the property will be in your LLC. We are doing this now on two refinances of ours. You will be allowed up to 10 properties, with funding in your name, of conventional financing. Don’t stress about the due on sale clause, the LLC is already in your name and there are always ways to rectify a problem if the bank/lender even have a problem with it.
We paid cash for a property and held in an LLC for a few months. We took it out of LLC in December to refinance with a 30yr fixed rate loan. Can we quit claim it back into the LLC now?
I know this is an older thread, but any Florida lenders on here? I'd like to discuss a similar situation.
@Chris Pflum if you are needing any general questions answered about lending then post it in the main forum instead of here. You'll get more responses that way. If you are just looking for any Florida lender, because you know what you need, etc. then just post in the Florida forum. It's very active and lots of friendly people there. Hope this helps.