Will Banks Refi a HML that's in my LLC's Name?

Question

Looking for advice. I'm about to obtain a hard money loan for a my 1st BRRRR. I've heard that banks don't like to loan on property's that are in a LLC with less than 2 years of financial history. Is this a rumor or should I not have a problem refinancing? Rehab will take 2-3 months and I'd like to refi after finding tenants.

Andrew Zamboroski · Answer

So many great replies already! A DSCR loan sounds perfect for your situation. You can also refinance quicker based on the full appraised value. Happy to help when you get close to finishing rehab!

Chris Seveney · Answer

Get a DSCR loan - that will be your best bet vs.a bank - if you can get a bank great but I would start talking to dscr lenders now. When we originate we tell borrowers to start early so we can get all paperwork processed so when we can pul the trigger, we can. Also chat with your HML, as some (we do this) offer a discount to get a short term bridge loan and refi to DSCR long term

Devin Peterson · Answer

Matt, not too sure where you heard this information, but it really couldn’t be further from the truth and the world of investment financing. This is the fundamental purpose behind. DSCR loans. You can refinance or purchase any non-owner occupied investment debt in the LLC name. Should not be a problem for the person who knows what they’re doing. You have a lot of options here!

Jeff Chisum · Answer

Rumor.  You can do a DSCR

Erik Estrada · Answer

Hey Matt,

Most Hard Money lenders will allow you to close in an LLC. I have never heard of a hard money lender requesting 2 years of financial history from the LLC the property is held under.

If this is a 1-4 Unit residential property, most hard money lenders are going to require a personal guarantee. The title to the property can be held under the LLC. In order to qualify as a PG, most lenders are going to want to see 21% or more ownership if this is a multi member LLC or 51% or more ownership if there are only 2 members. You only need 1 PG, and it can be anyone who meets the parameters I outlined above.

You should be able to refinance on a DSCR loan as most lenders will allow closing in LLCs. Again, there will need to be a PG on the loan.

Ghassan Jabali · Answer

Hello Matt,

I hope you're doing great. Generally, banks can refinance inside of an LLC. However, they may give it less favorable terms unless you sign a personal guarantee. Additionally, they may charge potentially commercial interest rates instead of residential interest rates.

One potential alternative is that you can purchase the property in your own personal name and then transfer the property into a land trust. The Land trust would then be connected to an LLC as the beneficiary so that it has the protections of the LLC backing it up. When you refinance, you can take the property out of the Trust, back into your personal name, do the refinance, then move the property back into your Trust.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.