Refinance in an LLC

[Mike Sattem]

I recently completed the rehab on a 4-plex I bought this spring using a commercial loan and am not looking to refinance into a traditional 30 year fixed note. However, every lender I have spoken to has told me they will require me to deed the property out of my LLC and into my personal name before they can refinance it, at which point I will deed it back into my LLC. Every other rental I have had and refinanced was in my personal name, and I only started up my LLC the beginning of 2014.

How does this make sense?

Is this a common practice?

[Jay V.]

I understand that this is the recommendation that everyone give, but I have 2 issues with it:

1. Lender can call  your note if the individual is no longer the title holder

2. There is something called piercing the corporate veil which removes the liability protection from an LLC if certain conditions arise. This type of transfer seems like a slam dunk case for piercing the corporate veil to me.

Disclaimer: I am NOT a lawyer and I don't even have real estate investments yet. However, I have taken courses in business law and the above are my concerns. This is definitely not advice, but I'd make sure you're comfortable with the points above before transferring title in and out of an LLC.