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Why Not to Put Your Property in an LLC

Diane Kennedy

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Freddie Mac just made a rule change that states if your property has been in an LLC for any part of the past 6 months you can NOT refinance.

Fannie Mae is expected to do the same thing.

We're working on a quick solution for our clients and I'll be posting the latest ideas on my website and probably doing a teleseminar on it this weekend.

Talk to your CPA, talk to your lawyer, talk to your mortgage broker right away if you have property inside of an LLC.
 
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Russ H

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WOW.

This is huge news.

Thankfully, we don't have any props in LLCs, but the only reason is b/c the prop is in CA, and we structured things a bit differently (to protect against potential lawsuits).

But if we'd had prop anywhere else in the country, it would have been held in an LLC.

Thank you again for your presence and contributions to these forums, Diane. You are an invaluable member of the fastlane community.

REP SPEED!!! :banana::banana::banana:

-Russ H.
 

SteveO

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I don't understand why they would do this. When I do apartment loans through either organization, they require an LLC. They review the docs to make sure that certain items are addressed for borrower and lender protection.

:coco:
 

Bilgefisher

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eek. I was just about to put one in an LLC. Thanks for the heads up.
 
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phlgirl

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Thanks for taking the time to post the information, Diane. Really nice to be tuned in. :) ++++

Fortunately, 98% of our property is in an individual name and we are not looking to refinance any time soon. Still thinking about how this might affect us though...... and others....very interesting.

Any mention of trusts?

SteveO - I am with you. I just can't find the logic in these decisions.

Thanks again.
 

andviv

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I'd assume the reason is that properties held in LLCs are likely investors', so by ruling them out they focus mostly on owner-occupied.
Diane, thanks a lot for posting this.
 

Diane Kennedy

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I'd assume the reason is that properties held in LLCs are likely investors', so by ruling them out they focus mostly on owner-occupied.
Diane, thanks a lot for posting this.

Andres, you go it in one. SteveO, the reason I think that it's not affecting you is because the apartment buildings and larger projects you do would all be investors, just by definition. But, there is a feeling that it's unsophisticated investors buying SFR that caused our crisis. And they want to stop it.
 
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SteveO

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Clearly they are being reactive instead of proactive. They should have put some type of measures in long ago. Shutting down the investors that are still making a go of things seems counter-productive at this point.
 

phlgirl

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Clearly they are being reactive instead of proactive. They should have put some type of measures in long ago. Shutting down the investors that are still making a go of things seems counter-productive at this point.

Exactly. Clearly, if you are still in the game, at this point, you are doing something right. It is a fantastic time to buy and with a knowledgeable investor, you would think it would make great business sense to the banks, to support this.

Clearly there needs to be means of verifiying the stability a business beforehand but how is the economy to re-balance, if they won't even lend to the more experienced players?

I could be way off here. I am certainly no economics genius but it just does not make practical sense to me.
 

Bilgefisher

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Yes, many people foolishly invested and lost their shirts. That shouldn't mean preventing others from trying. 9/10 Businesses fail within the first 3 years, should we stop giving loans to start-ups as well? I'm coming from the new investor side of things and this just makes little sense to me. I'll be contacting my CPA to see if she has any solutions for me.
 

Corrado79

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I have a few properties titled in LLC's. Great. I guess if I need to refi, I could always just quit claim the property to me and hope they don't call the loan for 6 months. This is really stupid. Maybe Fannie Mae will be smart and not follow. Maybe I'm going to be stuck using credit unions and the like in the near future.
 

Bilgefisher

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I have a few properties titled in LLC's. Great. I guess if I need to refi, I could always just quit claim the property to me and hope they don't call the loan for 6 months. This is really stupid. Maybe Fannie Mae will be smart and not follow. Maybe I'm going to be stuck using credit unions and the like in the near future.

Go to Diane Kennedy's blog at taxloopholes.com She has posted a possible solution you can talk to your CPA about.
 
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^eagle^

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This seems like an effort to get more homeowners back in the market. Where I live a lot of people refinaced in the bubble and remodeled their homes. Then the buble burst and the ARMs kicked in and the foreclosure came down like rain. Prices fell to half the peak values. I am looking at a house that is now 80000 that priced 160000 two years ago.

I'm buying as an owner occupied but am looking to exit it as either a rental or a lease option.

So the government is looking out for the middle class.

but once again the rich out smarts em with the "trust sandwich"

Thanks diane. I understand it now.

rep+
 

Diane Kennedy

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Thanks for the rep. You definitely understand the game!

I've posted the teleseminar and a couple of special reports over at www.TrustSandwich.com. It's all free. I wanted to put the information all in one place.
 

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