Can I refinance my personal conventional mortgage into a DSCR owned by my LLC?

Question

I am currently working on building my RE portfolio. As a beginner, before learning about all different types of lenders, I purchased my first investment property under a conventional investment mortgage in my own name. Since then I have opened my LLC and am beginning to buy other investment properties under that LLC. As I am not a spring chicken with my age..there are always concerns about "What happens if I die?"...therefore the underlying base of my question. Would it make sense to refinance my conventional into a DSCR with my LLC that way I can create a plan for my single member LLC upon my death so that my RE assets are also passed along...

Thanks

Devin Peterson · Answer

1000% consulting with an attorney this question if protecting assets is the key purpose here. Agree with everyone else!

Erik Estrada · Answer

You need to consult with an attorney before doing anything.

But you do not need to go the refinance route as long as your current lender will allow you to do a quitclaim deed to an LLC.

Jacqueline Wright · Answer

Great question, and I commend you for thinking ahead when it comes to estate planning and ensuring your investments are structured properly!

Yes, you can refinance a property into a DSCR loan under your LLC.

This can be beneficial for a few reasons:

• Separation of Personal and Business Assets: Moving the property under your LLC’s umbrella through a DSCR loan will allow you to separate your personal liabilities from your business assets, which is crucial as your portfolio grows. This structure also provides an added layer of protection for your personal assets in case something happens with the property or other business liabilities.
• Estate Planning: By having the property under your LLC, it can simplify the process for your heirs and ensure that your real estate assets are managed in line with your wishes. You can set up a succession plan within the LLC, making it easier for your beneficiaries to take over or distribute your assets as planned.
• Streamlined Financing: DSCR loans can be more flexible than conventional loans since they focus on the property’s cash flow rather than your personal income or credit. This can be useful if you want to keep growing your portfolio without being limited by personal DTI or income requirements.

That said, here are a couple of things to keep in mind:

• DSCR Loan Terms: These loans often have higher interest rates and different terms compared to conventional mortgages, so it's important to assess whether the potential benefits of restructuring the loan through your LLC outweigh the cost of refinancing.
• Asset Protection Plan: Even if you refinance into a DSCR loan, make sure to have a solid estate plan in place. Consulting with an estate attorney who understands real estate investment structures can help ensure that your wishes are carried out efficiently.

It sounds like you’re on the right track in terms of growing your portfolio, and refinancing into a DSCR loan under your LLC could be a smart move. Definitely weigh the pros and cons, and as always, consulting with a real estate attorney or financial advisor may help you navigate this transition smoothly.

Hope this helps and best of luck with your continued growth!

Bobby Feinman · Answer

@Michell Chase

Good morning Michell, I want to address your comment that you are beginning to buy other investment properties under your LLC. This strictly relates to asset protection. If the properties you are buying with the same LLC are to be renovated and sold, that's fine. However, if you are buying multiple properties to keep in your rental portfolio, I strongly suggest that each property have it's own LLC.

The reason is simple...asset protection. If you own multiple rental properties in the same LLC and, god forbid, something goes wrong with one or a few, the rest of the performing properties are put at risk since they are also owned by the same LLC. Having each rental property in it's own LLC eliminates that risk and each property will stand alone and not be put at risk by another property that is not performing.

Hope this helps!

Bobby

Jay Hurst · Answer

Could you? Sure. But I cannot imagine why you would want to. and if moving over to a LLC is very important for you, assuming you financed after June 1, 2016, you would be able to move over your conventional loan to an LLC.  See this link:  https://servicing-guide.fanniemae.com/svc/d1-4.1-02/allowabl...

Brandon Beardt · Answer

This may be a question you should ask an attorney. You can 100% refinance into a DSCR loan and close/vest in your LLC, however, I would imagine the rate is likely worse than what you have now with the conventional loan which would impact your monthly cashflow. You may also be able to simply QCD the property in your LLC but you run the risk of the current lender calling the note due because of the transfer. An attorney would be better off advising as to what would make the most sense for you in your particular situation.