Cash Out Refi on a MF in LLC Help

3 Replies

I own a 4plex outright that was purchased for cash and subsequently deeded into an LLC on advisement from my attorney. Through normal conversations with other attorney friends, I am not sure I need this property in an LLC because I have plenty of insurance with an umbrella policy. I am weighing those risks and understand there are pros and cons to both.

I am under contract for another 4plex and would like to cash out refi my first 4plex to use the money for the second 4plex but also get better financing terms by QCDing the first 4plex back to my name and for financing. Can anyone punch a hole in this idea besides the risk associated properties not being in an LLC?

Thanks in advance!

Congrats Phil on your 2nd 4plex! 

It seems like you have 2 things to consider before making any decision. 1 - liability/risk     2 - financing

1. Liability/Risk - What I have been told by attorney's in WA state is putting your investment property into an LLC limits risk to your personal assets in the event there is a suit against you. Your personal attorney should be able to give you advise on how to manage your personal risk & manage that with your LLC structure. Example I've gotten: someone in your 4plex gets hurt & sues you. If you have the property in your LLC, your risk is limited to the assets held in that LLC (that specific 4plex, and any other assets held in that LLC). If you QCD the 4plex back into your personal name, I've understood that your personal savings, retirement accounts, other investments would be at risk for a suit to come after. Your umbrella policy should provide extra layer of insurance protection, yet if the 4plex is in your LLC, then that risk will still be limited only to the assets in your LLC.

2. Financing - pulling equity out of your 1st 4plex might not require you to QCD property 1 back into your personal name. (I'm assuming you (maybe w/ spouse) control the LLC 100%). Your lender should be able to help you navigate your specific financing requirements on both deals. Unless you are otherwise limited to the loan program to get a better deal by QCD back into your personal name, you may be safest to keep your 1st 4plex in the LLC.

Hope that helps!

It's okay. As long as you are the sole member of the LLC, you should be able to get conventional financing. Call @Jerry Padilla. He can help you. He's here on BP

@Phil Falcini you can absolutely finance under an LLC.

I'm an investor myself and all my properties have their own LLC.

As such, I lend on C/O ReFi's on properties held in LLC's all day long. Very rarely are investment properties held in a person's name.

Especially with pro-tenant states like here in California, keeping an investment property in your name is far too great a risk.

I’ve been burned before by tenants on the only property I had in my name and it wasn’t pretty. I’ve since learned my lesson and have take every precaution to protect myself.

Hope this helps!