BRRRR - How to use hard money and then refi ?

Question

I'm looking in Florida (jacksonville specifically) to start with some BRRRR properties. The hard money lenders require an LLC to lend to, but then when I want to refi into a conventional loan, I wont be able to do so under the LLC as I'd have to get corporate loans which may require more money down.. Am I missing something? is there a better way to approach this?

Andrew Kerr · Answer

@Andrew Merewitz I have done this two ways.

The first is use private or hard money to buy & fix-up the property, then place tenants and keep it in my LLC. Then refinance with a portfolio lender.

The second way is the same as above, but then just before you refinance, use a quit claim deed from the LLC to your personal name. Then do a refinance with a convention lender. Make sure to be up front with the lender so they are ok with it, but it is possible as I just did this a few months ago.

Melvin List · Answer

@Andrew Merewitz the property seasoning is 6 months for a cash out refinance to go off the new appraisal value. If you purchase in an LLC you don't have to pull it out of the LLC you can do that at closing. Here is the guideline:

If the property was owned prior to closing by a limited liability corporation (LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the LLC may be counted towards meeting the borrower’s six month ownership requirement. (In order to close the refinance transaction, ownership must be transferred out of the LLC and into the name of the individual borrower(s).

Andrew Kerr · Answer

@Andrew Merewitz be up front with the refi lender. You don't want them getting a copy of the title work towards the end of the refi process and not allowing it. When I did this, I let the loan officers I was talking with know I just transferred title to my name, and it was previous in my LLC which I was the sole owner of. One lender said I don't think our underwriter would allow it, the other said no problem.

Brian Garrett · Answer

Yep @Andrew Kerr nailed it.

Evan Stamps · Answer

@Andrew Merewitz glad I found this thread. Working through the same issue with my first investment property in Jacksonville. How did the refi out of your HML turn out? Any learnings worth sharing?

Andrew Merewitz · Answer

@Melvin List thanks so much, thats great to know! I'll go that route then to try to get better rates/lower cash needed with personal financing vs corporation (and i'll make sure I have personal umbrella insurance policy as well!)

Andrew Merewitz · Answer

@Melvin List Thats helpful, thank you. Do you have any more info on those seasoning requirements?

Melvin List · Answer

@Andrew Merewitz yes if the property is currently in the name of an LLC you can have the property put in your personal name at closing. The seasoning requirements have changed with in the last couple of months.

Andrew Merewitz · Answer

@Andrew Kerr awesome, thanks for the advice, much appreciated!

Andrew Merewitz · Answer

Thanks, thats a great approach! Do you mean to be up front with the conventional lender as they may see this as a red flag? or let the hard money lender know up front that this is my intention?

BRRRR - How to use hard money and then refi ?

BRRRR - How to use hard money and then refi ?

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