Refinancing a Property and Operating as an LLC

[William Hurd]

My brother and I are just getting started out in real estate investing and are looking to follow the BRRRR strategy and looking to acquire our first property within the next 6 months. We are trying to be diligent on the front end and are reaching out to potential lenders to discuss financing options for when we get to the "refinance" portion of the BRRRR strategy. After talking with multiple traditional lenders, we noticed that there are multiple options in terms of lending outside of the traditional fixed rate loans. Options such as 10-, 15-, and 30-year loans, 10/6 arm, 10/1 arm, 5/6 arm, 5/1 arm loans are available. One common issue that we see from most lenders is that the 30-year fixed loan comes with a price (e.g. costs 3.5 - 5.5 points to obtain the loan). The second issue is that most of the lenders that we call will not allow for an LLC to have the loan and it has to be in an individual's name.

My question is 1) Do you have any recommendations on lenders who are investor friendly? 2) Do you advise agains ARM loans, and what are the pros and cons? 3) Any advise on purchasing properties as an individual vs as an LLC?

Thanks,

[Nate Sanow]

First off kudos on getting to know all the options. 
In my market most community banks will loan in an llc with similar terms. Across the country many of the no and low doc types will do it as well. I wish someone told me sooner that community banks > credit unions. At least, on a local level for me, credit unions don’t always have a dedicated staff member to loans, especially commercial lending. Which, and you may know this but check into commercial lending too. It doesn’t mean commercial real estate, it usually means a community bank has house money they are not selling on the secondary market and so they can be flexible on terms.