Jul
22
Your LLC Loan is Gone!
July 22, 2008 |
For almost two years now I’ve been advising anyone who will listen to begin a refinance strategy to peel residential investment property loans off of their personal credit into portfolio loans in the name of their entity or LLC. No one listened. I heard a bunch of excuses such as “it’s too expensive” or “I don’t have enough equity” or “I don’t think I need to do that.” Well, a couple of things have happened in the last month or so to prove that (once again) I was right. Hate to say I told you so, but…
Beginning August 1st, Freddie Mac is limiting the number of financed properties an investor can have to 4. Fannie hasn’t yet announced a reduction but some Fannie lenders have voluntarily reduced their max to 6 in anticipation of an announcement.
Yesterday, Wachovia announced that they are no longer accepting loans. Wachovia was the bank that did the residential LLC loan. So, now all those investors that have been calling in a panic in response to the Freddie Mac rule have waited too long. Ix-nay on the efinance-ray. That’s pig latin for “no can do an LLC loan.”
So, what to do now? If you have more than 4-6 financed properties on your personal credit and you want to employ this LLC refinance strategy, your broker can’t help you. I get at least two calls a day from investors that are looking to buy or refinance a property and they are essentially unfinanceable with conventional financing. They always ask me to “be creative.”
Well, my creative solution for those investors ended yesterday. If you are in this boat, you may be able to help yourself by developing a relationship with a portfolio lender on your own. A lender that will loan in the name of your entity and doesn’t sell their loans into the secondary markets. But I can only think that if you could do that, wouldn’t you have done that already?
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2 Comments so far
So, are you saying once an investor gets to 4 loans they are done?
Brandi - If you are using a Freddie lender, yes beginning 8/1/08.