Buying a House with LLC but refinancing for a rental under personal name

[David Chappell]

Hi, I am under contract on another property. I am either going to flip it or keep it as a rental. I am getting a hard money loan for the property under my LLC, but if I keep it I would like to refinance out of the HML into a 30 yr conventional load under my name.

Can anyone give me a quick rundown how that would work? Would it just be a normal refinance process or are there further steps that need to be taken to get the property under my name before the refi is complete?

Thanks!

[Carlos Valadez]

Hi David..as long as your operating agreement can demonstrate that you are the owner of the LLC there should be no problem in refinancing out of the HML. Just as long as your LTV after ARV is 75% or less you'd be good

[David Chappell]

Quote from @Carlos Valadez:

Hi David..as long as your operating agreement can demonstrate that you are the owner of the LLC there should be no problem in refinancing out of the HML. Just as long as your LTV after ARV is 75% or less you'd be good

Hi Carlos thanks for the help. I’m the sole owner of the LLC, would I be keeping the property in that name or it would it have to be transferred over to my personal name to be financed conventionally?

[Brandon Croucier]

Hi David,

It should be a pretty simple process on the refi side, would love to connect and go over how it gets done!

[Patrick Roberts]

For a Conventional (Fannie/Freddie) cashout refi, you'll need to move title from the LLC to yourself personally. If you want to keep in an LLC, DSCR is probably the simplest way to do this. For DSCR, a 3 yr prepayment penalty and paying 1-1.5 points will put you pari passu with Conventional products right now for the most part.

Fannie: B2-1.3-03, Cash-Out Refinance Transactions (02/01/2023)

Freddie: 4301.5(a) 3/6/2024

[Carlos Valadez]

Quote from @David Chappell:

Quote from @Carlos Valadez:

Hi David..as long as your operating agreement can demonstrate that you are the owner of the LLC there should be no problem in refinancing out of the HML. Just as long as your LTV after ARV is 75% or less you'd be good

Hi Carlos thanks for the help. I’m the sole owner of the LLC, would I be keeping the property in that name or it would it have to be transferred over to my personal name to be financed conventionally?

To be refinanced using a conventional loan it would have to be moved to your name, assuming you're looking to convert the property as your primary. If you rather keep it as an investment for cash flow then DSCR would be the route to go. 

[Nick Belsky]

@David Chappell

A few key things to point out:

You will need to change vesting on the deed back over to your personal name prior to beginning your conventional application.  Fannie/Freddie changed some guidelines around last September where you can no longer change the deed at closing.

You absolutely cannot move into the property until you have closed the refi.  Every investment loan I've ever seen makes you sign quite a few docs at closing stating that you will NOT occupy the property.  That means don't put bills in your personal name or have anything that would indicate on your credit that you used that address as your primary home.  When you go to refinance, you will most likely get quizzed on the chain of title and why it was moved from one vesting to another.  Be honest and follow the correct steps and you won't have any problems, unless the UW simply doesn't like it.

Overall, the process is pretty standard, but if you don't follow the rules, you will have a heck of a time getting the conventional financing.

Cheers!

[Charlie Gonzalez]

Hi David,

With a Non-QM program, you can vest in your personal name at closing. No issues there. And rates are on par with conventional. Quicker turn times and less paperwork. Please feel free to message me and I’d be happy to answer any questions! 

[Jay Hurst]

Quote from @Charlie Gonzalez:

Hi David,

With a Non-QM program, you can vest in your personal name at closing. No issues there. And rates are on par with conventional. Quicker turn times and less paperwork. Please feel free to message me and I’d be happy to answer any questions! 

I just wish DSCR only lenders were honest about their product. No the rates are not on par with conventional when you figure in additional costs and pre-payment penalties.

[Timothy Hero]

Why go conventional on the refinance? DSCR lenders will close in an entity, allowing more protection for you, and the industry has become super competitive compared to conventional. More times than not, conventional lenders are only 10-20 bps lower on the rate for rentals.

Better to go low doc, not on credit, and be protected with an entity.