LLC Cash Out Refi - Can You Get 30 YR Amorization

17 Replies

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year Fixed rate terms are available for LLC own properties for sure

Similar to you the (2) I have done were 15 year (i.e. which was the max that was offered) and my brother just did (3) all on a 20. I have well find it hard to locate anyone willing to do a 30 year for an LLC. This being said most of my portfolio model is built on 15 year loans so it works well for me (i.e. I want all my properties paid off in about 15 years).

Originally posted by @Andrew Hejtmanek :

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year terms are actually the norm in the portfolio world.  Big difference between 30 year amortizations and 30 year fixed loans (although both are available).

If your business model is based on paying them back quickly (like a 15 year loan), I would still recommend going with the 30 year fixed and paying it like a 15.  As long as you don't pay down more than 20% of the principal in any given year when there's a prepayment penalty, it won't be triggered (generally).

Best of luck

Stephanie 

@Andrew Hejtmanek

Like you I haven't seen it offered for LLCs. 15 or 20 is typical.

I have done a 30-yr conventional against my own name then transfer the property back into my LLC. That probably isn't ideal for a partnership situation I'd imagine.

@Andrew Hejtmanek

My first BRRRR refi was done 2 months after purchase. The property was refi'd with a portfolio loan that was 30 yr fixed. So yes, it can be done.

Originally posted by @Stephanie P. :
Originally posted by @Andrew Hejtmanek:

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year terms are actually the norm in the portfolio world.  Big difference between 30 year amortizations and 30 year fixed loans (although both are available).

If your business model is based on paying them back quickly (like a 15 year loan), I would still recommend going with the 30 year fixed and paying it like a 15.  As long as you don't pay down more than 20% of the principal in any given year when there's a prepayment penalty, it won't be triggered (generally).

Best of luck

Stephanie 

 Stephanie,

This is essentially what my plan was but was unable to identify lenders that provided 30 year loans especially fixed to my LLC (i.e. multi-member). My options based on the handful of banks I solicited were 15 or 20 year Cashout Refinances with a 5 year reset. I am not as familiar with portfolio loans but should I specifically be asking the banks if they offer portfolio loans and would I expect the rates to be much different than that of a Cash Out Refinance?


Jared

Originally posted by @Jared McCullough :
Originally posted by @Stephanie P.:
Originally posted by @Andrew Hejtmanek:

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year terms are actually the norm in the portfolio world.  Big difference between 30 year amortizations and 30 year fixed loans (although both are available).

If your business model is based on paying them back quickly (like a 15 year loan), I would still recommend going with the 30 year fixed and paying it like a 15.  As long as you don't pay down more than 20% of the principal in any given year when there's a prepayment penalty, it won't be triggered (generally).

Best of luck

Stephanie 

 Stephanie,

This is essentially what my plan was but was unable to identify lenders that provided 30 year loans especially fixed to my LLC (i.e. multi-member). My options based on the handful of banks I solicited were 15 or 20 year Cashout Refinances with a 5 year reset. I am not as familiar with portfolio loans but should I specifically be asking the banks if they offer portfolio loans and would I expect the rates to be much different than that of a Cash Out Refinance?


Jared

To answer your question, you should be speaking directly to a local bank or credit union and then a portfolio broker. You won't be able to keep the loan in an LLC using conventional financing because Fannie Mae and Freddie mac won't allow it. If you have multiple members, it's unlikely you will be able to change the ownership structure.

With the local bank or credit union, they may charge more for cash out.  With a portfolio broker, you should be able to get 75% ltv for cash out without an additional hit to the rate.  Be wary of how the operating agreement is structured because some lenders will gravitate toward the member with the lowest credit score for pricing.  If you have someone that is a member with beat up credit, they should show a significantly lower percentage of ownership than the members with good credit because members over 20% ownership will have to sign a personal guarantee.

Lending has become tiered these days.  There are:

  • Big banks
  • Credit Unions and Local Banks
  • Non-banks
  • Brokers

Going down to your local bank, you may get a loan.  You may not.  Lots of paperwork, overlays and restrictions.  They make money when they lend money out, but they also make money on CD's and deposits.

Credit unions and local banks are great resources.  Sometimes they have aggressive underwriting guidelines that are geared toward investors; but they are specific to their local footprint.

Non-banks get paid when you close your loan, so they have a vested interest in getting a loan to close.  The name of the game for them, though is to sell that loan to Fannie Mae and Freddie Mac, so they are going to be restricted by their guidelines.  The non-bank may do everything they can to aggressively follow the guidelines meaning they may not have overlays or extended guidelines, but their guidelines Fannie Mae and Freddie Mac guidelines will be followed.  Still lots of paperwork; tax returns, pay stubs etc...

Portfolio brokers use a wide variety of lenders to fit the borrower's situation with the specific lender.  They may have 4 or 5 different hard money lenders they send loans to and 4 or 5 long term lenders they send buy/refinance and hold borrowers to.  Their rates are higher than the options above because the loans are riskier and the lender charges more to use their money.

All of these tiers have a place in our business.  The key for borrowers is to know which one will help you and which one will be wasting your time or costing you money.  I always recommend borrowers exhaust their conventional financing options before going the portfolio broker route.  The money is cheaper and the ltv's can be higher (sometimes).  Once the borrower finds they don't qualify for conventional financing from a bank, a credit union and a non-bank lender they find the portfolio lender is their best and easiest bet.  Not the cheapest option, but losing a deal over a couple points  can be like stepping over dollars to pick up dimes.

Originally posted by @Stephanie P. :
Originally posted by @Jared McCullough:
Originally posted by @Stephanie P.:
Originally posted by @Andrew Hejtmanek:

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year terms are actually the norm in the portfolio world.  Big difference between 30 year amortizations and 30 year fixed loans (although both are available).

If your business model is based on paying them back quickly (like a 15 year loan), I would still recommend going with the 30 year fixed and paying it like a 15.  As long as you don't pay down more than 20% of the principal in any given year when there's a prepayment penalty, it won't be triggered (generally).

Best of luck

Stephanie 

 Stephanie,

This is essentially what my plan was but was unable to identify lenders that provided 30 year loans especially fixed to my LLC (i.e. multi-member). My options based on the handful of banks I solicited were 15 or 20 year Cashout Refinances with a 5 year reset. I am not as familiar with portfolio loans but should I specifically be asking the banks if they offer portfolio loans and would I expect the rates to be much different than that of a Cash Out Refinance?


Jared

To answer your question, you should be speaking directly to a local bank or credit union and then a portfolio broker. You won't be able to keep the loan in an LLC using conventional financing because Fannie Mae and Freddie mac won't allow it. If you have multiple members, it's unlikely you will be able to change the ownership structure.

With the local bank or credit union, they may charge more for cash out.  With a portfolio broker, you should be able to get 75% ltv for cash out without an additional hit to the rate.  Be wary of how the operating agreement is structured because some lenders will gravitate toward the member with the lowest credit score for pricing.  If you have someone that is a member with beat up credit, they should show a significantly lower percentage of ownership than the members with good credit because members over 20% ownership will have to sign a personal guarantee.

Lending has become tiered these days.  There are:

  • Big banks
  • Credit Unions and Local Banks
  • Non-banks
  • Brokers

Going down to your local bank, you may get a loan.  You may not.  Lots of paperwork, overlays and restrictions.  They make money when they lend money out, but they also make money on CD's and deposits.

Credit unions and local banks are great resources.  Sometimes they have aggressive underwriting guidelines that are geared toward investors; but they are specific to their local footprint.

Non-banks get paid when you close your loan, so they have a vested interest in getting a loan to close.  The name of the game for them, though is to sell that loan to Fannie Mae and Freddie Mac, so they are going to be restricted by their guidelines.  The non-bank may do everything they can to aggressively follow the guidelines meaning they may not have overlays or extended guidelines, but their guidelines Fannie Mae and Freddie Mac guidelines will be followed.  Still lots of paperwork; tax returns, pay stubs etc...

Portfolio brokers use a wide variety of lenders to fit the borrower's situation with the specific lender.  They may have 4 or 5 different hard money lenders they send loans to and 4 or 5 long term lenders they send buy/refinance and hold borrowers to.  Their rates are higher than the options above because the loans are riskier and the lender charges more to use their money.

All of these tiers have a place in our business.  The key for borrowers is to know which one will help you and which one will be wasting your time or costing you money.  I always recommend borrowers exhaust their conventional financing options before going the portfolio broker route.  The money is cheaper and the ltv's can be higher (sometimes).  Once the borrower finds they don't qualify for conventional financing from a bank, a credit union and a non-bank lender they find the portfolio lender is their best and easiest bet.  Not the cheapest option, but losing a deal over a couple points  can be like stepping over dollars to pick up dimes.

Stephanie,

Thank you for the elaborate response I am still trying to digest this information. Thus far our method has been to purchase with cash then seek a "Cash Out" after the purchase to obtain the money back to reinvest. We are currently working with a Local Bank using 80% LTV @ 5.7% Interest. They offer both 20 and 15 year terms of which we have selected 15 although I understand your point about moving to 30 but we have been unable to source someone who is willing to do 30 year terms. As well I have been unable to find anyone willing to give fixed rates as most have a 5 year reset. I guess my initial question is as a Multi-Member LLC should I be seeking a portfolio broker based on your opinion or just stick with the loan options that I am currently at?


Jared

Originally posted by @Jared McCullough :
Originally posted by @Stephanie P.:
Originally posted by @Jared McCullough:
Originally posted by @Stephanie P.:
Originally posted by @Andrew Hejtmanek:

Friends, 

My partner and I are currently rehabbing a property in Tulsa, Oklahoma. We will have pretty good equity in the property when completed. We would prefer to hold the SFR for 2-5 years, but banks I have spoken with are not willing to go more than 20 years on the amortization (5 YR balloon, 20 YR Amortization). I have spoken with quite a few organizations & decided I would seek input before inquiring with local bankers. Is anyone seeing 30 year amortizations on LLC debt for properties that are not new (this one is a 1950's SFR in a very strong neighborhood).

Thanks for the feedback.

Andrew

30 year terms are actually the norm in the portfolio world.  Big difference between 30 year amortizations and 30 year fixed loans (although both are available).

If your business model is based on paying them back quickly (like a 15 year loan), I would still recommend going with the 30 year fixed and paying it like a 15.  As long as you don't pay down more than 20% of the principal in any given year when there's a prepayment penalty, it won't be triggered (generally).

Best of luck

Stephanie 

 Stephanie,

This is essentially what my plan was but was unable to identify lenders that provided 30 year loans especially fixed to my LLC (i.e. multi-member). My options based on the handful of banks I solicited were 15 or 20 year Cashout Refinances with a 5 year reset. I am not as familiar with portfolio loans but should I specifically be asking the banks if they offer portfolio loans and would I expect the rates to be much different than that of a Cash Out Refinance?


Jared

To answer your question, you should be speaking directly to a local bank or credit union and then a portfolio broker. You won't be able to keep the loan in an LLC using conventional financing because Fannie Mae and Freddie mac won't allow it. If you have multiple members, it's unlikely you will be able to change the ownership structure.

With the local bank or credit union, they may charge more for cash out.  With a portfolio broker, you should be able to get 75% ltv for cash out without an additional hit to the rate.  Be wary of how the operating agreement is structured because some lenders will gravitate toward the member with the lowest credit score for pricing.  If you have someone that is a member with beat up credit, they should show a significantly lower percentage of ownership than the members with good credit because members over 20% ownership will have to sign a personal guarantee.

Lending has become tiered these days.  There are:

  • Big banks
  • Credit Unions and Local Banks
  • Non-banks
  • Brokers

Going down to your local bank, you may get a loan.  You may not.  Lots of paperwork, overlays and restrictions.  They make money when they lend money out, but they also make money on CD's and deposits.

Credit unions and local banks are great resources.  Sometimes they have aggressive underwriting guidelines that are geared toward investors; but they are specific to their local footprint.

Non-banks get paid when you close your loan, so they have a vested interest in getting a loan to close.  The name of the game for them, though is to sell that loan to Fannie Mae and Freddie Mac, so they are going to be restricted by their guidelines.  The non-bank may do everything they can to aggressively follow the guidelines meaning they may not have overlays or extended guidelines, but their guidelines Fannie Mae and Freddie Mac guidelines will be followed.  Still lots of paperwork; tax returns, pay stubs etc...

Portfolio brokers use a wide variety of lenders to fit the borrower's situation with the specific lender.  They may have 4 or 5 different hard money lenders they send loans to and 4 or 5 long term lenders they send buy/refinance and hold borrowers to.  Their rates are higher than the options above because the loans are riskier and the lender charges more to use their money.

All of these tiers have a place in our business.  The key for borrowers is to know which one will help you and which one will be wasting your time or costing you money.  I always recommend borrowers exhaust their conventional financing options before going the portfolio broker route.  The money is cheaper and the ltv's can be higher (sometimes).  Once the borrower finds they don't qualify for conventional financing from a bank, a credit union and a non-bank lender they find the portfolio lender is their best and easiest bet.  Not the cheapest option, but losing a deal over a couple points  can be like stepping over dollars to pick up dimes.

Stephanie,

Thank you for the elaborate response I am still trying to digest this information. Thus far our method has been to purchase with cash then seek a "Cash Out" after the purchase to obtain the money back to reinvest. We are currently working with a Local Bank using 80% LTV @ 5.7% Interest. They offer both 20 and 15 year terms of which we have selected 15 although I understand your point about moving to 30 but we have been unable to source someone who is willing to do 30 year terms. As well I have been unable to find anyone willing to give fixed rates as most have a 5 year reset. I guess my initial question is as a Multi-Member LLC should I be seeking a portfolio broker based on your opinion or just stick with the loan options that I am currently at?


Jared

It's all a math problem.  If you want the best cash flow, go with the longest term (a portfolio broker can get you a 30 year term).  If you want to pay the property off faster, go with a 15 year fixed.  If you want security and still pay it off faster, take the 30 year fixed and pay it like a 15.  Best of both worlds

Stephanie

@Stephanie P.

Good afternoon Stephanie,

I would like to move up from purchasing SFR rental properties into residential multi family and eventually commercial multi family as long as the numbers are right.

I paid the following:

Purchase price - $34,000

Downpayment - 15% or $5,100

Origination Cost (A) - $1,382.52

Services Borrower Did Not Shop For (B) - $546.26

Services Borrower Did Shop For (C) - $768

Taxes & Other Governmental Fees (E) - $115

total- $7,911.78

Is there any way for me to get into residential multi family or commercial multifamily for 15% or 20% down and keep closing costs to a minimum which I think I have done a pretty good job at this far ?

Originally posted by @Jimmy Diego Egas-Rojas :

@Stephanie P.

Good afternoon Stephanie,

I would like to move up from purchasing SFR rental properties into residential multi family and eventually commercial multi family as long as the numbers are right.

I paid the following:

Purchase price - $34,000

Downpayment - 15% or $5,100

Origination Cost (A) - $1,382.52

Services Borrower Did Not Shop For (B) - $546.26

Services Borrower Did Shop For (C) - $768

Taxes & Other Governmental Fees (E) - $115

total- $7,911.78

Is there any way for me to get into residential multi family or commercial multifamily for 15% or 20% down and keep closing costs to a minimum which I think I have done a pretty good job at this far ?

 Jimmy

You bought a house for 34K.  Where is it?  When did you buy it? Is it a single family residential?  Did you renovate it and if so, how much did you put in? What's it worth now?

Usually, our minimum loan amount is 75K.  That means you have to have at least a value of 100K without taking closing costs into consideration.

Stephanie

Sincerely, thank you all for the input. I might have succeeded in finding a 25 year amortization on 75%LTV , which would be a success in my mind as that would leave only a couple thousand $ in the deal.

@Dan Gamache

@Stephanie P.

@Tarik Turner

@Jerry Padilla

Thank you all for the info.  What types of rates are typically available to investors through portfolio brokers or other sources?  Is it typically higher than the rates offered by local banks?  The 5YR balloon/20YR amortization I was initially offered was 5.5-ish (local bank).

Andrew,

Let me keep it simple. Yes, you have options for 30 year lending to an LLC.

Paul

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