All Forum Posts by: Ryan Johnston

@Shaun Weekes: I understand that's the guideance re. a delayed financing refi, but that seems to be in conflict with what @Upen Patel is saying re. no wait period for rate-term.  Can you please speak to that?

@Brent Coombs: yes, the private loan was for 75% of ARV at the time of purchase, which was significantly greater than the actual purchase price. Our ARV calculation was right on the money, so the loan seems to be a good candidate for rate-term, if we can figure it out! That said, we did place a mortgage (Warranty Deed in Texas) on the property to secure the loan.

@Upen Patel, since my private loan is already for 75% of the current appraised value, could I simply do a rate and term, without delay?  I'm not looking for additional cash out - just to refi the high-interest loan to a long-term, conventional loan.

@Shaun Weekes, I'm not fully understanding.  Here's the scenario, with rounded numbers.  Let's say I have a property that was purchased fewer than six months ago, it is appraised at $100k TODAY and there's a $75k private loan on it.  I have $25k in the deal.  I'm wanting to do a rate-and-term refi whereby the $75k private loan is refinanced to a conventional loan.  No additional cash out, no need for appraisal to change.  Just want to get out of a high interest private note and into conventional.

Are the terms/requirements/guidelines for a conventional/conforming Rate and Term refinance different than a cash-out refi?  Not asking about the differences in the product/concept, I've got that.  Also, not talking about portfolio lending.  Looking for answers that apply to conforming, conventional Fannie/Freddie loans.  Wondering about differences in underwriting guidelines between Rate and Term and cash-out.  Specifically:

Seasoning:  Specifically, if I have a hard money/private loan for 75% of ARV, can I do a Rate and Term refi to pay off that loan without 6-month seasoning period? Any seasoning at all? Shorter? Longer?

Refinancing out of an LLC:  In this post-continuity of obligation era, properties generally have to be held personally for six months to get a conventional refi where there is a mortgage involved (I've heard there are lenders who don't require this, but I have yet to find one who's not wanting to do a portfolio loan - send me your references if you've got one!)? Are the rules more relaxed for rate and term? Can you transfer title from the LLC to a personal name at close like you could in the good ol' days?

Thanks everyone! Looking forward to your ideas!

In the past, you could buy a property with cash in an LLC, rehab it, and then just before cash-out refinancing, transfer it back to your personal name to conform to Fannie/Freddie guidelines and get a traditional loan, as long as the borrower was also a 25%+ owner of the LLC previously on title. After the loan is sold off (usually 30ish days), transfer it back to LLC so the asset is held personally for as short a time as possible. (no "due on sale" lectures plz. Any of us who txfr title to LLCs are aware of the slight but technically possible risk).

We discovered the hard way this program is no longer available, as we're now stuck with two properties that were rehabbed in an LLC, and now that we're at the end of the 6-month required seasoning, we've been told by no fewer than 6 different lenders that we have to move the properties to our personal names, wait ANOTHER 6 MONTHS, and then refi, if we want to go with a Fannie/Freddie loan.

Any brilliant ideas to get around this/move forward without waiting another 6 months with cash tied up and (in the case of one property) a hard money loan racking up major interest?

Also, I don't like the idea of transferring these properties into my own name for six months where I lose the insulation of the LLC. Maybe I can't have my cake and eat it too (i.e., suck it up buttercup and get a commercial/portfolio loan), but I'm going to at least try first!!!

Ready for ideas!

Fellow investors: it is so annoying to rehab a cash- or hard-money-purchased rental then have to wait six months before doing a traditional/conventional/conforming/Fannie/Freddie cash-out refi.  I know that I could just bite the bullet and refi with a more expensive portfolio loan with more relaxed seasoning requirements, but are there any ways around to still get a Fannie/Freddie loan?  Some things I've heard (most of which I have strong misgivings about...)

1. Purchase property initially in LLC, sell it to yourself personally and secure traditional financing, then transfer back to LLC (cons: taxes, blurring line between business/personal - corporate veil risk? Due on sale, but no different than transferring to LLC in normal situtation).
2. Refi after rehab with portfolio loan that's cheaper than hard money, then refi again with traditional after 6 months (cons: so many closing $$$$!!!!)
3. Delayed financing refi, but not really an option because I want my cash back!

Other ideas?  They don't even have to be good ideas!  Just fostering creative conversation.  

Guys, thanks so much.  Complicated stuff, and these are the answers I'm needing to make the best of an imperfect situation.  Grateful!

@Charlie Fitzgerald and @Upen Patel (et al, but you guys in particular since you're lenders), let me throw another twist in and get your thoughts. My broker's underwriting department has suggested that a possible work-around would be to actually sell the property - that is, I would personally purchase the property from the LLC, thus getting financing by way of a sale, and then immediately after closing transfer the property back to the LLC. This seems like it'll never work, but underwriting was the one who suggested it... There could be capital gains considerations as well as "corporate veil" issues, but from a technical standpoint, is this even possible? Not asking so much "should" you, but "could" you (though I'm happy to hear the up/down on "should" too!). Thanks!

@Charlie Fitzgerald.  Thanks. Here's a new twist: I spoke to just such a lender this afternoon who felt he could make it happen.  I have another property in the same situation, except that this one has a private loan attached to it.  It'll be done seasoning in January.  The terms of the private loan are simple:  12% interest, 1 year, no monthly payments, just a lump-sum payoff at the end.  The broker said that, because the loan (secured with a mortgage) did not have monthly payments associated with it, that was likely going to prevent me from getting it refinanced.  He said that, had it had monthly payments where I could show proof of payments, they'd be fine.  Not understanding how this would impact things.  Could you speak to this?

@Charlie Fitzgerald

@Andy D., yes both lenders were advising re. a Fannie/Freddie loan.

@Charlie Fitzgerald - Thanks.  I suppose the challenge is finding a lender who will do this!  The lender I'm using presently thought it was possible, but then when it got to underwriting they kicked it back and said we needed to re-title, wait six months, then come back.  Given the amount of time and paperwork involved in the process, it's daunting to think I could go that whole process several more times before finding someone who can make this happen!  Any suggestions?

We are about to do a cash-out refi on a property that we purchased with cash in the name of a single-member LLC which I own. I purchased the property over 6 months ago, and it's been in the LLC the whole time. Now that the property is rehabbed and rented and we've met the 6-month seasoning requirement, we want to cash out using a conventional loan. I am getting conflicting information at this point:

1) I have one lender saying that, in order to use a conventional Fannie/Freddie loan and because the property is in an LLC, we would have to transfer it back to us personally before close AND restart the 6-month waiting period. I was planning to transfer, but the big surprise is that the 6-month seasoning period starts over. Yikes!

2) I have another lender saying that, because the property has seasoned within the LLC for 6 months, we can transfer to ourselves personally and refi without delay

Obviously, the 2nd is what I want to hear, but if the 1st is true, I need to know. Have you had experience to this end? Curious to get your thoughts!