Refinancing into 30 year mortgage with LLC’s name

[Geoffrey Giannone]

Hi everyone!

I just recently bought my first rental property and rehabbed it with a partner of mine. Looking ahead, we hope to refinance it into a longer term mortgage with lower rates than we currently have. However, our goal is to have this in an LLC when we refinance. We have heard that banks do not give LLC's 30 year mortgages.

We have heard that some people refi the property in their personal name and then transfer the title to the LLC's name in order to get the 30 year mortgage. Is this common practice? And if so are there any issues that could arise from doing this? It seems like transferring title without the bank knowing is a bit of a gray area. Any thoughts would be appreciated.

Thanks in advance for any answers and advice.

[David M.]

@Geoffrey Giannone

Yup, this comes up often.  Here are a bunch of prior discussion threads you might find useful:

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

Yes, its common for people to purchase personally then transfer into a LLC. However, as you'll see in some to most of those threads, in my personal opinion its a bad idea. It just doesn't make sense from a layman's point of view to keep doing it. As mentioned, there is the Due on Sale clause, which transferring Title is generally considered a sale per the definition of the Clause. Apparently, Fannie Mae guidelines say if the holder the Title is the 100% the same as the holder of the LLC holding the Title then its okay. Also, the Due on Sale clause apparently happens very rarely. Also, I think the simple answer is just be able to refi within 30 days -- granted, perhaps easier said than done in some cases.

Its the alter-ego issue of transferring the Title to the LLC as that pierces your corporate veil. I have the long winded discussion about that in the above threads how it wouldn't make sense as a regular arms length transaction.

As for 30yr commercial mortgages, apparently there are some.  Another BP poster said to look at Visio Lending, Lima One Capital, and CoreVest Finance.  I just saw a lender in NJ advertising 30yr commercial loans (for investment residential properties).  I have no idea what it takes to qualify for those or the costs/interest rates.

Anyway, I consider all that part of the "costs" of the limited liability / asset protection of the LLC. Also, the cost of investing with a non-spousal partner (requiring a legal entity for accounting/tax and legal purposes)...

Like I said, this topic comes up daily, so you can find plenty of other discussion threads if you troll through BP.

Direct message me if you want to chat.  Good luck.