Conventional financing with an LLC?

[Prashant Sharma]

Hello BP community,

All of you experienced investors who own duplexes tri and quads, are you getting conventional financing (30 yr fixed) for your investments? If so do you form an llc and get the bank to finance an llc investment? I have been told no to an llc financing by a few non commercial mortgage brokers. 

So what is the strategy there to protect your assets? Or are there companies out there financing conventional loans for llc that I have not come across?

[Kevin Romines]

@Prashant Sharma Unfortunately you can not get conventional or government financing in the name of the LLC. However if you bought the property in an LLC and are using a cash out refinance which has a requirement that your on title for 6 months or more, Fannie Mae will now count the ownership time frame within the LLC as part or all of the ownership time required and will not start the clock all over for you on this.

To get conventional or Gov. financing, you must hold and take the loan out in your personal name. As far as protection that the LLC would give you, I would suggest that a well crafted landlord policy followed by an umbrella policy will cover you much better than the LLC would.

Fannie Mae is by far the best rates and terms available for rental property 1-4 units. So based on that, you want to go conventional on the loan. You only go commercial or portfolio or Non-QM if for some reason you cant get Fannie Mae financing. 

Commercial and portfolio gives you a 20-30 year term with a 5 year call or recast, meaning you must refinance or re-qualify for the loan again. That comes with new closing costs every 5 years and a rate that is commensurate with the rates at that time. A 30 year conventional fixed rate, you only qualify for one time and it never adjusts or has a balloon payment.