BRRRR Strategy - LLC Financing - need advice please!

[Darrick Reed]

Hello All -

We began investing in Hold properties in the Kansas City market and just recently bought our 2nd investment home (both cash thus far). We are having a blast! Really looking forward to growing our business. Our intention is to follow the BRRRR Strategy. However, we are having a hard time moving forward because our homes are owned under our LLC (which was recommended we move them into for liability purposes), but Finance instituions will now allow us to do a Cash-Out Refi under the LLC.

I have talked to 6 Financing companies thus far, and they have all told us we need to deed the properties into our personal name, then wait for the 6 month seasoning period to pass, and only at that point will they would do a cash-out refi. 

Any advice on how to get around this? We want to keep the properties in an LLC to protect ourselves, but also need the loan to scale the business.

Thank you!

[David Faulkner]

Originally posted by @Nathan Click:

@Darrick Reed - This is a very common question. I recommend the LLC set up because it allows you to deal more in the commercial loan space where seasoning requirements can be a non-issue. There are far more creative financing products on the commercial side. Immediate refis are very common especially when we pay off hard money loans and bridge loans. I have personally dealt with this kind of deal in the past. The downside to the commercial space is that interest rates are higher, PGs are generally required anyway, and you can run into issues with minimum loan amounts (i.e. you got a deal at $25K but the lender only does deals $50K and above). Feel free to reach out to me if you need any more help.

 And lets not forget those pesky balloon payments at 5-10 years, refinanced at who knows what rate if they can even be refinanced at all. They are more flexible, no argument there, but no way am I personally willing to give up locking in historically low 30 year fixed rate mortgages whose terms cant be touched or matched with commercial lending. So, I say buy an umbrella insurance policy, run a tight ship, don't intentionally lie or screw people over, and enjoy your 10 (+10 more for your spouse if applicable) conforming resi mortgages. If after you max these out you want to continue buying, then go for it with commercial financing, but not before. As for liability, you will incur more liability driving your car than you will with a well run rental property business IMHO.