BRRRR Cash-Out Refinancing for a new LLC (with 3 partners)

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BRRRR Cash-Out Refinancing for a new LLC (with 3 partners)

Mark Cermak
Investor · Denver, CO · Member since 2020 · 15 posts · 12 votes

Hi there! I'm currently looking to form an LLC / Partnership Agreement to get started on doing BRRRR's and funding them with cash up-front. Looking to fully vet this out before getting started and want this to be set up correctly from the start. I've spoken to a CPA/JD and understand how to best set things up from a tax/liability standpoint, but the last piece that's missing is this: HOW DOES A BRAND NEW LLC (with no tax returns/credit history) GET FINANCING FOR A RE-FI ON A BRRRR? The whole point of this is to be able to replicate it, and if you can't get a cash-out refi, it doesn't work. Who can provide this financing over and over again at 75-80% LTV for a new LLC to leverage funds?

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Alex BekezaBusiness Member
Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
6y

@Mark Cermak Most of the big nationwide commercial options will not require that the LLC have any history or seasoning. The loan is based entirely on guarantor FICO and subject property cash flow (DSCR based on proposed rates/LTV).

As far as 80% LTV for Cash Out, it doesn't exist right now in this commercial space. However, 70-75% is doable.

@Kris Wong You're correct that rates are higher than Fannie/Freddie but 30 year fixed options are still available.  

[email protected]818-606-8823
Investor Property Loan5306 Reviews
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  • Daniel DietzPro Member
    Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
    6y

    @Mark Cermak we dont do the BRRRR method, put we are a 3 way LLC that does buy-n-holds.

    We each had our own rentals already with conventional loans and decent credit scores. When we first formed a few years ago as a new LLC we worked with the 'commercial side' of a small local bank. They hold the loans in house and mostly base the loan on the deal, not like a typical mortgage. One of the criteria they use is DSCR (lots of info here on BP about it). They like to see a score of 1.2, which means you can take in at least 1.2 times what you PITI is.

    The terms are not as good as traditional loans, but one we are looking at right now is 4.75%, 25 year maortization and locked for 10 years, so still pretty good.

    Dan Dietz

    [email protected]608-524-4899
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  • Mark Cermak
    OP
    Investor · Denver, CO · Member since 2020 · 15 posts · 12 votes
    6y

    Thanks @Daniel Dietz for the info!  Very helpful.  

    Anyone know of solid private financers that would work with a new LLC? Looking to make some contacts here. I'm specifically looking in the Austin, TX market right now.

    1Reply
  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    6y

    Yes, there are a few that will do it. Most, if not all, will require you to personally guarantee the loan. That has been my experience. There are many lenders that are trying to get into the Austin market and are competing with each other. Given the competition, it may very well be that some lenders might do it now without the personal guarantees in place. I had a lender from Miami reach out to me today asking about doing deals in the Austin market.  

    0Reply
  • Kris Wong
    Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes
    6y

    This is something I have struggled with quite a bit. Getting a commercial loan on a residential property is not easy, but can be done if you manage to find the right lender (or so I hear). Unfortunately I haven't been able to find the right lender (but I would love to know if you find one!). As others have mentioned the terms will not be as good as a conventional loan. You will typically see a 5 to 10 year term, with a 20 or 25 year amortization. Coupled with a higher rate, this will have a significant impact on your cash flow.

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  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Mark Cermak Most of the big nationwide commercial options will not require that the LLC have any history or seasoning. The loan is based entirely on guarantor FICO and subject property cash flow (DSCR based on proposed rates/LTV).

    As far as 80% LTV for Cash Out, it doesn't exist right now in this commercial space. However, 70-75% is doable.

    @Kris Wong You're correct that rates are higher than Fannie/Freddie but 30 year fixed options are still available.  

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
    WebsiteView Page
    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    6y

    @Mark Cermak

    You are just not speaking to the correct amount of lenders. There are lenders who will lend to a LLC.

    You may need to speak with a portfolio lender or a commercial lender.

    When you invest in real estate through a partnership with others, the partners/partnership is required to keep track of each partner's basis.

    This will be important when you do a refinance and distribute the proceeds to the partners/members.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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