Refinance Property in LLC Out of Hard Money Loan

[Keenan Rusk]

Hi BP,

I intended to BRRRR a property in Baltimore City by initially using a Hard Money Loan (HML). The lenders that I've spoken with thus far will only lend to an LLC. I have no problem creating a single-member LLC, but I have read numerous time that refinancing out of the loan could be problematic. That is the trap I am trying to avoid long-term.

I've built a relationship with Howard Bank and they've informed me that they could do the refinance out of the loan at favorable terms, but I would have to move the property from the LLC to personal at closing and avoid the post-transfer seasoning period under my name (about 6 months, from reading other posts). Since I do not own many properties, the loss of perceived liability protection is not significant at this time, as I intend to purchase umbrella policies. Alternatively, my hard money lender said they could also refinance into one of their 30-year rental loans, but it would be rate/term (no cash out) and the rates are higher than what I could get by going conventional.

I am curious what other investors have done in this specific scenario with regard to using HML to acquire property using an entity. Would you find a lender that allows the property to remain in the LLC or transfer it and take advantage of conventional rates?

Keenan