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

[Ian Barnes]

Are you that loyal to Howard Bank that you couldn't just go to another local Baltimore bank and refi into your llc?  Sounds like Howard Bank wants the opportunity to go after you personally should you default on a loan.  There are plenty of local Banks such as The Columbia Bank, Revere Bank, Old Line Bank, Essex Bank, MECU, The Harbour Bank, Point Breeze CU, BB&T Bank, Columbo Bank, etc,etc that work with investors to cash out refi properties into a loan.  As seen above, you have quite a few options.