How to refinance a property under an LLC

11 Replies

Hi folks. We purchased our first property with cash under an LLC at a discount (~20%). We did not have to do any rehab as the property was in rent-able condition already. Now we want to refinance it and pull our money out for the next property. We have been talking to lenders and nobody seems ready to refi. I wonder whether it is due to the fact that the property in under LLC or time (wait 6 months)?

Any ideas/info to get refinancing is helpful.

Cheers,

Sudheer

Normally you're going to have to be on title for around 6 months to do a refinance based on the appraised value of the property. 

@Sudheer Bobba

Since the property is under an LLC, it's only eligible for a commercial loan. Fannie Mae doesn't lend to corporations.

Most cash out refi's are going to be around 65%-75% LTV. But, some lenders will want seasoning of the cash before doing a cash-out. You should shop around and see if you can nail down someone for delayed financing since you paid with cash. They might force you to transfer it into your name first.

@Christopher Phillips . Looks like that's whats happening, the lender wants to transfer onto our name. Is there any other way to keep the property under LLC and get refinance?

The property in in B/C neighborhood and for liability reasons we would prefer to keep it under LLC.

You can keep it under the LLC if you use a commercial or portfolio loan.

@Sudheer Bobba I have 2 suggestions here:

  1. Keep it in the LLC and use a commercial/portfolio loan to do a cash out refinance. The rate will be higher, or variable, or both, but you can keep the property in the LLC name.
  2. Transfer it to your personal name, then transfer it back to the LLC name after you close on the "conforming, conventional" type of loan. If you bought this property with cash and don't have a lien on it then you can do a refinance on the first day you are on title on the property. There's a specific step to do this but if you are ok with being on the deed for about 30-40 days then you can do this option. You would then close, then place the property back in the LLC name.

If you have questions on either of these strategies then let me know and I can fill in the blanks. Thanks!

@Sudheer Bobba If you want to title the loan directly to LLC, your options are a residential portfolio (30 yr fixed) or a commercial loan (5-7 yr ARM or balloon).

Rates/points in both cash are not as attractive as Fannie/Freddie.

@Sudheer Bobba If you get a conventional loan with title in your name and then transfer title to LLC, then you will trigger the "Due on sale" clause which is part of ALL conventional loans. If and when the bank realizes what you have done, they will recall the loan.

@Sudheer Bobba you can refinance under delayed financing exception. The lender won't lend on LLC name the closing will be on personal name for conventional loan . You don't have to wait 6 month.

Originally posted by @Upen Patel :

@Sudheer Bobba If you get a conventional loan with title in your name and then transfer title to LLC, then you will trigger the "Due on sale" clause which is part of ALL conventional loans. If and when the bank realizes what you have done, they will recall the loan.

I know this is in conventional loan contracts. Has anyone ever known of anyone to have the loan recalled once they placed it in a LLC? Any case studies?

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