How to cash out on a 3 unit owned by LLC

8 Replies

Hi guys, I own a 3 unit under my LLC free and clear. I would like to use the equity to buy another property. What would you recommend as my best option? 1- Can I take out like a HELOC on an investment property? 2- Someone mentioned to me that you can't get a mortgage on a property owned by an LLC, and it needs to be owned under a personal name for 6 months before getting a mortgage. What's that all about? Any advice on this would be greatly appreciated. P.s. Please tag my name in your response. For some reason I only get notifications when a reply has my name mentioned in it. Thanks!
Moshe Eisenberg I was informed by my lender that if I wanted to cash out on an investment property that is owned free and clear I had to wait 6 months after closing. I don't know why. I'm not sure about the LLC though.

@Moshe Eisenberg you are going to be doing a cash out refi. Because you own as an LLC you will have to speak with a commercial lender. Check with a local bank with a commercial lending dept. The 6 month waiting period is typical and may actually be a law.

I do cash-out refi on properties owned by my LLC all the time, with no 6-month waiting period. They key is to find a small local bank that is a portfolio lender (they keep their own loans, rather than selling them). Search "portfolio lender" on here and you'll find much discussion.

What you're wanting to do should be attractive to such a bank, especially if the threeplex has good cash flow. But they'll want to evaluate your overall financial situation before opening a relationship. It's very likely that they'll ask for personal guarantees of the funding (so they can go after you personally in event of default), even though the property is owned by your LLC.

So putting properties in an LLC closes down possibilities for them in terms of pulling out equity if you can't find a portfolio bank? Does a personal guarantee (which I understand) help pierce the veil that the LLC is for in the first place? thanks.

Conventional loans are available only to individuals, not entities.  That's a fannie/freddie rule.  So, properties owned by LLCs cannot be financed with a conventional loan.

The HELOC should give you a 80% loan, ( as good as you can do on a refi ) it Gives you the freedom to act when you need it and you owe nothing till you use it. Unless your trying to own the new property personally the LLC can own as many property's as you want.

Personal guarantees are usually required on all my loans. But I'm in this for the long haul. been 10 years now. Buying no Money down, In house loans.  

Thanks for the clarification on the six-month waiting period @Michael Hayworth . I agree about using local lenders. You are often able to speak with the decision makers (underwriters) as opposed to working with BofA for example where you are just a number. @Tammy Vitale the personal guarantee will have no effect on your "corporate veil". 

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