Should I put a 2 unit property into an LLC if I plan to BRRRR it?

Question

I have a 2 unit property under contract with a cash offer. I plan to cash out refinance in the near future. I have heard that it is much more difficult to cash out refinance if the property is under an LLC because it is considered a commercial property.

What are experienced investors thoughts?

Julee Felsman · Answer

Hi @Derrick Clark!

Residential lender here. It is possible to get a Fannie Mae loan on a property held in an LLC -- good old fashioned 30 year fixed rate at the same terms as any other investment duplex.

I'm clear to close and will be signing next week on refinances of a duplex and a four-plex that are vested in an LLC as of the moment. I'll have to move title to my name at closing, but will be able to put title back in the name of the LLC after closing.

I'm not licensed in NY (yet), so not offering a loan, just to be clear... but if you want a referral to a colleague who is and can handle this type of loan, I'd be happy to pass along a name... just DM me!

Julee

Ashley Wynn · Answer

Good info Julee! I'm sending you a PM.

Nicole Heasley Beitenman · Answer

I've heard the same thing, and I've held off on putting properties in an LLC until I find a lender in my area that isn't scared of LLC's. Take Kenneth's advice and look locally; making friends with the local banks will pay off in the long run.

Derrick Clark · Answer

Thanks @Julee Felsman

I sent you a DM.

Derrick Clark · Answer

Thanks for the insight @Kenneth Garrett. Just wanted to be sure I wasn’t boxing myself in by going the LLC route.

Kenneth Garrett · Answer

@Derrick Clark

It’s not more difficult.  You need to find the correct lender who will refinance this type of property.  I would work with small local banks.  Stay away from the big banks.  Under commercial you will have a higher interest rate and might only get a 5 year loan amortized over 20 years.  It varies from bank to bank and market to market.  No DTI issues with commercial but will need a minimum 1.25 Debt Service Coverage Ratio.

Should I put a 2 unit property into an LLC if I plan to BRRRR it?

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