BRRRR'ing with a Hard Money Lender - Only Lend to Entities

[Pablo Ramirez]

Hi all,

In my recent HML shopping, only one is willing to lend to an Individual while the others require an Entity. As this is my first BRRRR, I'd like to cash-out refi with a conventional Fannie/Freddie lender after seasoning period while my DTI & 10 Fannie/Freddie loan limit supports it.

If I create the LLC and vest title in it to the HML's liking, how and when would I transfer ownership of the property to my Individual name to be eligible for a conventional refi? Could I do something like a quitclaim deed right after closing with the HML in order to allow 6 months of required "seasoning" by the conventional lender after the title transfer to my individual name? What are the risks? Anyone been through this?

I understand Private Money may eliminate this hassle, but for the purposes of education let's assume HML is my only financing available. Thank you all!

[Julee Felsman]

Hi Pablo!

Yup! Your plan is 100% doable. I've helped clients do exactly what you're looking to do. 

The key is making sure your lender sets you up with a Fannie Mae loan, not Freddie Mac. Fannie Mae's guidelines explicitly recognize ownership through an LLC as part of the 6 months seasoning required prior to a cash-back refi.

It's important to note that the borrowers applying for the loan must have majority ownership or "control" of the LLC. I've not had a lot of luck documenting "control" outside of majority ownership, so I'd just make sure that you and any co-applicants have 51% or greater aggregate ownership in the LLC.

Freddie Mac does not see things the same way. They'd require you to transfer title to yourself 6 mos prior to making application for your refi.

Happy to answer other questions!

Julee