Cash Out Refinancing Question_ Beating a dead horse

[Adam Cole]

Hello everyone!! 

We just closed on our 5th investment property and our first long term rental. The 4/5 are short term student rentals located in Flint, Michigan. Currently we don't have loans tied to any of the properties and we're planning to pull out cash in order to fund new projects.

All 5 properties (worth ~$500k) are currently held within our LLC. In order to mortgage the properties (without using a commercial loan), I have been told that I will need to pull them out of the LLC (w/ a quitclaim)...and then finance them....and then use a quitclaim to put them back into the LLC.

My main question is can I personally guarantee the mortgage so that I don't have to swap ownership in and out of the LLC? I have that question sent to my lender but wanted to ask BP as well. The other roadblock I foresee is that the LLC is a 50-50 split ownership, so we are looking into restructuring it as a 51-49 split so there can be a majority owner for the mortgage to be tied to. Has anyone else found themselves fighting a similar roadblock?

I know that's a lot, but thank you for sticking with me and providing any help you can

Adam

[Torrell Palmason]

So there are three options for you on this loan. Two of the choices will leave the the loan and title in the name of your LLC.

Non-QM loans will allow you to keep the Loan in the name of you LLC with a personal guarantee. However the issue with doing this loan type is if you and your partner went in on all 5 loans together then one of you wanted to branch off on a deal of your own then you will have to count the full amount of 5 mortgages against you and only 50% of the income towards your Debt-to-Income Ratio.

A Commercial/Portfolio loan will allow you to keep the loan in your LLC with no personal guarantee. This means the mortgages won't count against your Debt-to-Income Ratio, only the Profit or Losses from these loans at 50% will count towards your DTI. This will allow you and your partner more flexibility to do deals and loans outside of your partnership.

The third type is the one you mention where you will have to quit claim yourselves to the title to refinance as Conventional specifically Fannie Mae before quit claiming the LLC back onto title. However, with this one like the Non-QM the mortgages will be counted against each of you personally and only 50% of the income received will be counted for you.

This will come down to personal choice between you, your partner and what your future plans are.

Best of Luck!