Can you BRRRR into an LLC?

42 Replies

I keep hearing and reading that moving a house into an LLC can trigger a "due on sale" clause of a typical mortgage. I got to wondering, what if I buy a house for a BRRRR strategy directly into an LLC with cash? Would a bank then loan the money to that LLC for the refi?

It seems like that would be an easy way to get homes into an LLC without risking the banking coming for its loan, but I'm a complete newbie, so I don't know what I don't know.

Thanks for any advice!

With an llc you can not get conventional 30 year terms.  You Can, as of about two years ago, get a Fannie loan in your personal name, then transfer into a single member llc with No due on sale risks, perfectly okay and allowed by Fannie.

@Wayne Brooks, if an LLC can't get conventional 30 year terms, then how are people doing all this?  Do you think most of the houses are held in individual's names?  How can one do the BRRRR method?  Have no idea about Fannie loan  - newbie year.  Can direct me to best places for learning about Fannie loan?  Thanking you for your replyl

You can purchase the property and get the loan in your name, then quit claim it over to your LLC after closing. I've heard you can also get the loan in your name and then at closing you can sign the property into the name of the LLC but I haven't personally done that yet.

@Kimberly Kirby Fannie Mae loans are the most popular loan out there...a “conventional loan”.  Fannie Mae is the quasi governmental agency that buys the loans from wherever you get it....a bank, mtg broker, etc.  It’s likely the loan you would get without asking, if you weren’t doing an fha or va loan.

@Wayne Brooks

Thanks for your reply! Did I read somewhere that the downside to a Fannie/Freddie loan is that you have to pay PMI for the life of the loan?

Been learning so much in such a short amount of time it’s all kind of a blur right now. :)

FHA has MIP for the life of the loan, for less than 10% down. But you're doing a rental property refi, so....no PMI because you can only borrow 75-80% ltv.

@Mark Rocka putting a property in an LLC has advantages and disadvantages. 1 advantages all your personal assets are protected. One of your disadvantages is if you ever need financing you cannot go conventional.

Originally posted by @Mark Rocka :

@Michael Corso

So what kind of loans are the folks doing the BRRRR method using? I think Josh recently said he's BRRRRing 2 homes a month.

Sounds like I need to figure this out and get that lender on my team.

Thanks for the reply!

My bank is doing interest free loan for 6 months and then rolling it into a conventional 30yr upon refinancing. At closing I put it in my name and then turn around and pay $100 to transfer it into lllc. 

Originally posted by @Mark Rocka :

@Justin K.

And there’s no concern with the bank enacting the due-on-sale clause? Im really fuzzy on the situations that would cause that. I’d prefer to sign contracts that don’t even have it, if such a thing exists.

I'm the financial guaranteer of the LLC. I asked my title company before I did it any they said they see it more often than not. If you start of with an LLC the best you can do is an ARM loan and as of right now and the way the financial markets are going, I'm not to keen on risking a monumental hike in 10yrs that kills all cash flow.

@Mark Rocka @Justin K.

The title company is not the bank. If they bank holds the loan then sometimes they do not care. You would have to ask them. Sure title companies see it all the time but they are not responsible nor would they really know if the loan is called. Are they always called? No. But they can be. Unless they specifically sell the loan to "Fannie Mae" not Freddie, but Fannie, you are at risk for loan to be called in full. "Fannie Mae" allows for transfer to LLC after closing. And I repeat LLC, not a S Corp, C Corp, series, but LLC. If you choose to refinance this same loan after you move it your LLC you will have to move it back to your personal name first. Fannie Mae does NOT allow you to close in the name of a LLC period. They just allow you to change vesting after transaction.

Originally posted by @Mark Rocka :

Thanks @Nicholas Covington! That's vital info. Does that mean an individual can go to Fannie directly to do the refi part of a BRRRR right before transferring the property to the LLC?

If it's in your personal name and you have owned the property for 6 months sure. Unless you are doing delayed financing to just refinance what you bought the property for that would be the only way you can refinance sooner than 6 months.

Or you just can just go with someone who has access to lenders that will just finance/refinance in the name of the LLC and not have to worry about it.

Originally posted by @Nicholas Covington :

@Mark Rocka @Justin K.

The title company is not the bank. If they bank holds the loan then sometimes they do not care. You would have to ask them. Sure title companies see it all the time but they are not responsible nor would they really know if the loan is called. Are they always called? No. But they can be. Unless they specifically sell the loan to "Fannie Mae" not Freddie, but Fannie, you are at risk for loan to be called in full. "Fannie Mae" allows for transfer to LLC after closing. And I repeat LLC, not a S Corp, C Corp, series, but LLC. If you choose to refinance this same loan after you move it your LLC you will have to move it back to your personal name first. Fannie Mae does NOT allow you to close in the name of a LLC period. They just allow you to change vesting after transaction.

A "series" IS a LLC so I'm not sure why you say this is not allowed. And yes you have to transfer it back IF you are going to refinance it with another conventional mortgage...but so what?

And as far as the elusive “due on sale” acceleration on non-fnma mortgages, it seems to be a snipe hunt here on BP. Nobody seems to be able to point to a case not involving some “lease option” or other chicanery...

@Scott L. you're pretty hostile for not reason lol. Not all lenders will lend to a series LLC as it is not a regular LLC. To answer your "but so what" comment, the reason I stated it to provide full facts to people seeking the information. It is not free to change it back over to your personal name, so it is an added expense that people might be aware of. Before you say "so what it's not expensive," that really isn't the point. It is just added information for people that did not know.

Whether lenders will lend to a series of a LLC was not the statement you made. You stated that FNMA would not exempt it from the DoS clause in a mortgage they purchased. My experience with retitling cost in Texas for a LLC is it costs the $35 and a visit to the notary and county clerk (if you don't feel like mailing it). Even when my lawyer did the first one (warranty deed) he charged $250. After that he said here's the Word template, do it yourself :-) . Honestly in addition to the belt and suspenders approach to liability of a LLC plus insurance, I do it to make closings easier. I travel all the time and in a community property state like Texas getting me and my wife to the title company at the same time on a weekday is a pain. Granted if I close in my or our personal names to get conforming financing we need to be there in person. I tried to have wife do it for my w/ our Durable Power of Attorney once and the bank wanted a proof-of-life video call and I was in the Pentagon in a secure area, so pushed the close till I came back. :-) . Anyway the series LLC in Texas has been a great time saver for my SFRs and flips. My local attorney was a closing attorney for one of the biggest title companies after law school, and he told me he thinks it's great too for how I'm using it. Since he's now a partner in the local real estate firm I take his word for it.

@Frank LaViola Yes, you can Put homes into an llc you purchased in your personal name with a conventional/Fannie loan, now with no DOS issues. But you can not Buy a home in an llc with a Fannie/Freddie Loan....they only lend to individuals.

@David Marti It’s Fannie Mae that allows you to transfer it into a single member llc, not the individual lender.  So a Fannie loan from any lender allows this.

@Scott L. Said “And as far as the elusive “due on sale” acceleration on non-fnma mortgages, it seems to be a snipe hunt here on BP. Nobody seems to be able to point to a case not involving some “lease option” or other chicanery...”

Yes, there are very few recent cases of this happening, but back in the 70s when interest rates went to 20+ percent, it happened a LOT. When it becomes profitable for banks to call in the loans, they will. Our country has never seen rates this low for this long. It’s not natural, and it will end some day. A 30 year loan leaves a lot of time for something to change. I’m just trying to gather info on the front end to protect my investment and cash flow. I appreciate your input.