Cash out Refinance of property in LLC?

4 Replies

I have a rental property in the St Louis area, Illinois side that is completely paid off and I want to refinance cash out (25K). This home is owned in an LLC, so I have contacted a couple local banks. The ones I have spoke to so far have all wanted me to deed the home out of the LLC before they can refinance. Does anyone have any lenders they can recommend that will refinance in the LLC? I will deed it to myself if no other way, but would prefer to keep in LLC.

@Justin C Huggins That's absurd, the bank should not be telling you to deed it out of the LLC. It sounds like the person you talked to doesn't know how to handle it and wants you to make their job easier. I'd recommend looking up brokers or lenders that are used to handling commercial loans in your area.

Yep, you'll need a commercial or portfolio lender.  Fannie/Freddie only do loans to natural persons.

I found commercial loans so fun with annual financial reporting, calls, adjustable rates, balloons, etc that I made it my primary goal to get rid of them last year.  Paid 2 off (commercial apt buildings) and refi'd out of the 3rd one with private money.  

No way I'd do commercial on a resi property for a lousy $25k, but that's just me.

Traditional banks don't like LLC's they want you personally responsible. Even if you take the property out of the LLC they may call the loan due if you try and put it back in the LLC.

Another issue you are not addressing is the tax impact on the LLC and your personal return. If this is a single member LLC, treated as a disregarded entity on your personal tax return, then not such a big deal.

However, if this is a multi member LLC and files either a corporate or partnership income tax return then other issues arise. Taking money out of a multi member LLC requires advanced tax planning in order to avoid double taxation. The other issue is you could actually be accused by the bank of stealing the money loaned to the LLC if the loan ever goes into default. I had a bank charge me their legal fees to answer a question once.

So now we get to non traditional lending. We recommend REIFA to our members and they get a better deal for going through Illinois REIA

I am also fighting with the small amount I want to pull out as well. I was on the phone and email banks and credit unions all day yesterday. Either they don't want to work with a LLC or a minimum amount is 40-50K they will loan. I am completely open to a HELOC as well, are they easier to work with in an LLC? Or do I need to just bite the bullet and deed it over to myself? I put this property in a LLC since it was out of state and I am using a property management company. Just made me feel better since I had far less control vs my other property right down the road.