How Do You Buy Owner Finance and Refinance to a 30-Year Mortgage as an LLC?

[Eduardo Cambil]

Hey BiggerPockets community,

I've been researching owner financing and how investors use it as a stepping stone to refinance into a 30-year mortgage. Many sellers offer owner financing at high interest rates (often around 12%), but I’ve seen investors buy properties this way, hold them for a while, and then refinance with a bank to lock in a much lower interest rate.

Here’s the strategy I’m considering, but I’d love to hear from those who’ve done it:

Step 1: Purchase the Property with Owner Financing

• Find a seller willing to finance the deal.
• Put down 10-20% and agree to a 12% interest rate for 5-10 years.
• Example: Buy a $55,000 property, put $5,500 down, and finance $49,500 at 12% interest.
• Monthly payment: $710.18.
• Rent out the property for $1,500/month while preparing for refinancing.

Does this sound like how you guys structure your owner-financed deals? Do you negotiate lower interest rates or better terms?

Step 2: Season the Loan & Hold the Property for 6-12 Months

I’ve read that banks won’t refinance a property unless you’ve held it for 6-12 months. During this time, the goal is to:

• Make on-time payments.
• Show strong rental income records.
• Improve the property's value to increase Loan-to-Value (LTV) for refinancing.
• Maintain a Debt Service Coverage Ratio (DSCR) of 1.2 or higher.

How long have you had to hold properties before banks allowed you to refinance? Have you found banks that don’t require seasoning?

Step 3: Refinance with a Bank

Once the seasoning period is over, I’d apply for a conventional or DSCR loan. Here’s what I’ve learned so far:

• Banks lend 75-80% LTV, so they likely won’t refinance 100% of the property value.
• They require LLC documents, rental income proof, and a strong DSCR.
• A new appraisal determines how much they’ll lend.
• If the bank offers 80% LTV on a $55,000 property, I’d get $44,000, meaning I’d need to cover any shortfall to pay off the owner-financed loan.

For those who have done this, have you found banks that offer higher LTVs? Have you been able to refinance 100% of the property value?

Step 4: Lower Mortgage Payments & Increase Cash Flow

If everything works out, the refinance would lower my monthly payment:

• Original owner-finance payment: $710.18.
• Refinanced 30-year mortgage at 7%: $365.
• Monthly rental income: $1,500.
• Cash flow: $1,134/month after refinancing.

Is this the type of strategy you’ve used to transition from owner financing to bank financing? Have you run into roadblocks I should be aware of?

Final Thoughts & Questions

This seems like a solid strategy, but I know there are nuances and hurdles along the way.

✅ What banks have you used to refinance under an LLC? ✅ How do you ensure the property appraises high enough to refinance fully? ✅ What’s the fastest way to refinance after buying with owner financing?

Would love to hear from those who have done this before! What’s worked for you? What challenges have you faced? Thanks in advance!