I am stuck in this situation. I bought a single family home completely paid, about 2 years ago which is rented to the same tenant. This house is under an LLC ( I’d like to maintain all my RE activites under LLC). Now, I want to take equity out and use funds for my next venture. Banks don’t want to lend and I don’t know the reason. I am only asking for 70-80% LTV. Approx. appraisal value for this property should be arounf $60-$70K in today’s market. It is producing $7000 per annum cash flow.
Can anyone suggest some creative technique on how I can utilize the equity of this house?
An LLC is like a child when it is first created, it has no job and no credit history. You the owner have to nurture the child (LLC) to grow it's income, pay taxes, keep a bank account, pay insurance, gain creditors and pay on time.
I don’t know how many investors have asked me why they can’t get a property loan in the LLC name when they have done nothing to build a legitimate business, create income, file taxes, create credit accounts or establish a credit history but think the LLC should be entitled.
I have a nephew who is 19 years old, he lacks the income, tax returns, credit score and credit history to get a home loan, but would you expect a bank or lender to loan him money under these conditions.
In fact most all lenders would deny him a mortgage even with a co-signer because of lack of conditions determining his credit worthiness and ability to pay.
You will need to take the property out of the LLC to get a new mortgage on it and may have seasoning issues for some period before a loan can be placed. (LLC is current owner, your taking it out changes title and may require 90 days to 1 year of “In Title” to qualify to refinance.)
Head over to creditboards.com and start reading the BizCredit forum. There is a pretty strong pre-defined process for establshing credit for your LLC. would take too long here to write it all down, but I can tell you from personal experience that if you follow the steps layed out over on creditboards.com that it WILL work…
any time I’ve refinanced a property owned by my llc in the past, I’ve had to QC deed it out to my personal name before refinancing (usually on the day of closing). Then I QC back to the LLC after closing. It’s been several years since I’ve refi’d so the rules may be different today. Also, check into the transfer tax rules of your state before changing title - some states will charge outrageous transfer tax even when you own the LLC and are transferring to yourself.