Will bank’s refinance a property that’s held under an LLC?

Question

I’m interested to know if I were to use the BRRRR strategy and purchase a property under an LLC, when it comes time to refinance would the bank lend me the money or will there be an issue due to the fact that the property is owned by the LLC and not myself?  If so are there any strategies I can use to as a workaround?

Additional information:  this would be the first property purchased under the LLC

Evan Polaski · Answer

Account Closed my single family rental loans are with a local bank through their commercial/portfolio side of the business.  At the time, this was the only lender I found that would lend on a small property held in an LLC, with the mortgage in the LLCs name, and me as a personal guaranty behind that.  My LLC was only 1 year old and had two houses in it.

So yes it is possible.  As mentioned, you will likely spend more on interest.  My loans are 20 yr am, 5 yr terms with fixed interest during the term and were about .5% higher than conventional. They let me cash out at 70% LTV, since I owned the house outright when I bought and rehabbed.

Long story short, yes you can borrow on a property in an LLC, even with a newer LLC, but it will cost more than a conventional mortgage.

Jim Paulson · Answer

Account Closed you might check with a local or regional bank / credit union that does portfolio lending.  I have a lender here in Boise that will lend to an LLC if they have a good track record and they only charge 0.25% more on the rate.

Anthony Wick · Answer

Account Closed. Why are you wanting to place this property into an LLC? Why not just finance in your own name, and get an umbrella insurance policy, if liability is what you are concerned with? If you're a single owner, and you are about to buy your first property, I find an LLC to be a layer that just isn't necessary.

Whitney Hutten · Answer

Account Closed With conventional financing, the lender is underwriting YOU... not the property.  So I hope you can see where it wouldn't make sense to the bank to refinance out to an LLC.

That said, I know investors who do refi in their personal names to snag the conventional rates, then move the title after closing to an LLC.  This technically triggers the due on sale clause.  I would talk to a real estate lawyer to understand the pros or cons of this strategy, and I'm not a lawyer.

Whitney Hutten · Answer

Account Closed Are you wanting to refi to the LLC or take advantage of the low conventional rates?  If your LLC is a single-member LLC, most likely you can refinance out to your personal name under a conventional loan.  I know of a few investor friendly lenders that will do this.  This is not legal advice: but then you could transfer the title after that.  Just know that you are personally securing the loan if you do it this way, but you can get that low rate and government backed loan.

Account Closed · Answer

@Jim Paulson thanks for the valuable info.  Are you aware if portfolio lenders lend to LLCs that are just starting up?

Mike Willis · Answer

@Jim Paulson

Jim,

When We buy house number 4 in the treasure valley, I'll reach out to you.

My last realtor didnt have the investor mindset...only betting on appreciation.

Mike McCarthy · Answer

@Sharad Peterson a conventional mortgage can’t be loaned to an LLC, though a local bank might consider a loan they keep on their books.

There are a bunch of other products for commercial and portfolio loans that may be available, though likely at a couple percent higher rate. Note that most banks require experience for commercial loans - but ask around!

Jim Paulson · Answer

Account Closed check with Heath Gamboa at Washington Federal in Meridian, ID.  I am not sure if I can post his contact data on this site since I am relatively new to BP and don't want to post anything I shouldn't.  You should be able to Google him though.  They are a portfolio lender and I use them quite a bit.  Have a client going through them on one time construction loan for a new build and I have had clients use them on a Cross Collateral Loan where people can buy a home without a contingency on selling first (hard to get accepted offers on contingencies in Boise these days) as long as the blended LTV of the two is about 75%.

Account Closed · Answer

Thanks for the valuable info Paul.

Will bank’s refinance a property that’s held under an LLC?

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