Cashout refi taxation and advice

[Daniel Ehevich]

Hi All,

1) Need some advice. Most of the cash out refinance lender require me to move the property from my LLC to my name for the refinance, is that a normal operating procedure or is it a taxation nightmare to move it back to the LLC after the Refi?

2) Another question I have is more of an advice. Since rates are very high now and likely will be lower in a year or even sooner, is there a way to not pay the refi fees twice? What is recommended in this case, take higher interest and try to lower closing costs? or pay points for lower rate but wait for longer to refi?

[Andrew Syrios]

If you're getting a loan that will be sold to Fannie or Freddie (your first ten investment loans) it has to be in your own name. You can move it back to your LLC after the loan and while this technically violates the due on sales clause, it's really, really unlikely they would call the loan.

As for the refinance fees, the only way to avoid paying for them twice is not to refinance twice. Interests will probably be lower a year from now (although who knows for sure) so if you can, perhaps it would be wise to hold off on refinancing. But if you want the money out now, you will have to incur the loan costs. But what you could do is ask for a 1 year ARM. That way the interest rate will adjust in a year automatically. (Of course, if rates go up, it will adjust upwards.) If you're very confident interest rates will drop, this is probably they way to go.