LLC's and refi's

Hi Guys,

I’d appreciate any info anyone might have on this.
I’ve got this property which was succesfully rezoned into a triplex. Before we bought it, we formed an LLC. This is our first venture into RE investing.

Several of the many books I’ve read about RE mention the benefits of the LLC. So, that’s what I did.

There’s no mortgage on this property; but am looking into financing options for the rehab work. Once the triplex is complete, the plan was to get a mortgage on it and pay off the higher interest rate loans on the financing of this rehab work.

Not so fast!
The mortgage guy I use (WellsFargo) says that very few lenders if any do LLC financing on residential multi family anymore.
So my question is:

  1. How do I get my money back out of the property? I don’t want to flip; it took quite some doing to get it re-zoned into a triplex from a single family.

  2. How do you get access to your equity several years down the line if there are few lenders willing to refi an LLC-owned property?

At this point, I’m considering just dissolving this LLC or deeding the property back out…

dango :banghead

Dan - go talk to a local bank. See if they do any financing w/ LLC’s. You’ll find some who will and some who won’t.
You found out the hard way that not every bank will work with an LLC. You just have to find one who will. That bank will have a certain amount of equity they’ll want in the deal. They may only give you a certain percentage of the value of the property as-is. Or you might be able to finish it out and then try to pull your money out after it’s all fixed.
Certain insurance companies won’t insure properties owned by an LLC. You just have to look around to see who will work with you. All our rental properties are held in an LLC so we’ve seen this first hand.

Dede it back to yourself and get a refi once you have it cashflowing. Then deed it to trust. The real problem you have is that the llc doesn’t have a credit history long enough to stand on its own.


Thanks so much for the info…

I’m off to the bank on the corner.

Good luck. Finding someone who will even work with LLC’s is the first hurdle. Be very up front with what you’re seeking to do. The banker will let you know if they’re comfortable with that or not. Lay out all your finances to them so they can see where you are financially.
Once you find someone willing to work with you and someone you’re comfortable with, you can start honing that relationship and see what you can get for future deals.

This is a job for the telephone, because you need to call EVERY bank, savings bank, S&L, and credit union in your region. Sounds daunting, but it’s well worth it to establish the most optimal lender relationship.

If you want 30-year fixed rate money, that means a conventional loan (the Wells Fargo’s of the world) and you will definitely have to deed back to your personal name. There may be a title seasoning issue when you do this, and some transfer fees will be incurred.

If you’re OK with 5 to 7-year fixed rate money (a 5/1 ARM or 7/1 ARM on a 25 to 30-year amort. term), then you can find a local bank that will work with your LLC as long as you provide a personal guaranty.