Refinance a house to pay back my personal HELOC

[Collin Smith]

I purchased a bank owned SFH earlier this year and rehabbed it with money from my personal residence HELOC. The house is in an Llc and I am looking to finance the house to pay back my HELOC. So far in contacting local banks and credit unions, I have learned that credit unions won’t finance to an llc and banks are pretty limited. I have found one bank that will do a 20 year am with a 5 year refi at 5.5-6%. Another bank (that I have worked with on another house and the HELOC) will only loan about half of what would be needed to pay back the HELOC. Most are suggesting to take it out of the llc to get a 30 year with better terms and then transfer it over to the llc later. (I did this once with an approval letter from the bank to guarantee they wouldn’t call the loan). I am looking for suggestions on what to do. 1) Just keep the house paying down the HELOC. 2) Find a bank to loan to the Llc with decent terms (suggestions for this) 3) take the house out of the llc and get conventional loan Right now, my properties are there to pay themselves down. We do not live on the cash flow or use it. Eventually we will have these paid off to fund the next homes. Thanks

[Greg Scott]

I would rule out #1. HELOC interest rates fluctuate and most HELOCs have a balloon date. And, that might prevent you from moving out of your primary residence at a future point. Better to have fixed rate long term debt.

Which direction you choose to go on your refinance really depends on your risk tolerance.   

I used to put all my houses in LLCs until I heard a podcast with an insurance executive.  He noted that lawsuits against owners are fairly rare and in his 30 year career the max payout he ever saw was $1M.   That was enough for me.   I immediately obtained a $2M umbrella liability policy.  It covers not only my rentals but also things like car accidents.  It is worth the few hundred bucks each year.  I now keep all my remaining SF properties in my name or my wife's.

In contrast, I have a friend who is a serious investor who went the other way. He has every single house in its own LLC and those LLCs are owned by a master LLC. I believe he also has an umbrella policy too, so he is about as bullet proof as you can get.

Financing and paperwork is simpler the way I am doing it.  The way my friend does it lets him sleep better at night with better protection.