All Forum Posts by: Chris Presnell

I am going through the same issue right now. We have a 2 person LLC (50/50 ownership) In order to take advantage of 30 year, fixed rate mortgages, we decided to buy our last property in my name only, then deed it over to our LLC at closing. My agent provided the bank with a binder in my name for closing, but ended up writing the policy in the LLC's name. Now 1 year later, the bank who bought the loan from the originator, asked for proof of insurance. When my agent provided it, they came back saying the name does not match.

So now we are not sure how to proceed..... my agent says the insurance is named correctly because the deed shows the LLC as the owner. I could deed it back to my name, and he could rewrite the policy as such, but then I'm back to holding a property in my individual name as opposed to the LLC.

Any thoughts?

Thanks for the quick replies.

Yes, our LLC is a pas through, so we show the profit or loss on our personal taxes. With depreciation, as well as the lower cash flows created by the existing 15 year mortgages, we show a loss each year for our LLC. There are also considerable expenses associated with rehabbing these projects to make them rent ready, so our early years for each property show considerable losses. My understanding is the bank should add back the depreciation to get a clearer view of true cash flows.

Hi All,

After being involved in purchasing approximately 12 SFR over the past 10 years, and listening to hundreds of real estate podcasts, there is one question I have never heard addressed in any detail. I'm hoping the experts on BP can help me out. So let me explain...

Everyone talks about buying properties in your personal name to get the best financing (30 year fixed ,lowest rate), then deeding the property over after closing to a LLC for asset protection. We have done this for a few properties, then proceeded to claim all the revenue and expenses through the LLC. I would assume many of the BRRRR investors are doing the same. The problem this seems to create is you now have a mortgage in your personal name, but are not showing any of the associated revenue on your personal tax return (it is all being shown on the LLC). This would seem to create a situation where each property drives up your debt to income ratio, making it harder to ultimately qualify for the 10 conventional mortgages that are allowed. We have a 2 person LLC, and after financing many of our properties directly through our LLC using 15 year mortgages, we are now interested in maxing out our 10 30 year mortgages while rates are so favorable, but we really have not found a good answer to this question.

Does anyone have any suggestions or best practices around this topic? It has been frustrating to hear all the talk about BRRRR, yet no one has ever addressed this particular financing issue.

Thanks in advance

Chris

We have been accumulating properties in our LLC's name for a few years now, but we have had to accept 15 year commercial financing, which includes a 5 year balloon.

Of course you can also go the personal route to secure 30 year fixed financing, then transfer into the LLC. This involves a few more moving parts, but seems to be pretty common.

Can anyone suggest best practices for participating in these auctions?

I'm particularly interested in how other investors navigate the title situation.  I assume they are not paying for $150 title searches on every property they bid on.  Are there any other ways to feel relatively safe you will not be hit with a big unknown lien once you buy?

We are just starting to get involved in these court house step auctions.  For the first property, we paid our attorney $150 to do a title search.  I'd be interested if anyone has any recommendations of a title company in NC who could do this for the $50 mentioned above?

HI All,

I am an out of state investor with an opportunity to acquire 2 properties in Girard.  I will be travelling there soon for an on site inspection, and I was hoping someone on here could recommend a couple of property management firms I could meet with.

Thanks

Chris

Yes, it will be harder to be cash flow positive, and you will also be exposed to considerable interest rate risk.

I think a lot of these "success" stories are with people doing 30 year loan in their personal names.  I'm not to keen to hold long term rentals in my name.

The problem seems to be you cannot get 30 year fixed rate financing on a property titled to an LLC because the bank will consider that a commercial property, therefore you would only qualify for 15 year amortization with a 5 year balloon.

I love to hear someone's experience using the BRRRR with LLC titling. If the quit claim is so effective, would the process be to buy the property in your personal name, do the rehab, apply for conventional refinancing, then quit claim it to the LLC after that financing is complete? I could see the local bank frowning on that.

I've had a similar experience. As most experts will advice you to hold your rental properties in an LLC for asset protection, you now can only qualify for commercial loans with the LLC. We bought 3 properties using conventional loans, then we created an LLC, and refinanced all three through a local local bank into one loan. The problem is, the best terms we could get on the commercial side were 15 year amortization with a 5 year balloon. Also, the rate is higher than the conventional side. This is a major negative to the BRRRR strategy that is rarely mentioned.

I'd love to hear anyone who was able to work around this. How do you get asset protection of an LLC at the same time getting the favorable terms of a 30 year fixed rate loan?