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By G. Steven Bray
Yesterday, we discussed how Fannie Mae has rescinded a portion of its loan guidelines concerning investors’ ownership of properties in LLCs. Specifically, according to conversations with Fannie, the change means an investor must move a property into his or her name 6 months prior to being eligible to take cash out of the property.
However, Fannie left open one avenue for cashing out a property in an LLC. It’s called the Delayed Financing program. If an investor purchases a property using cash, and holds the property in an LLC, the investor may pull out up to 75% of the equity within the first 6 months of ownership as long as all the members of the LLC will be on the cash out loan.
Note the two important conditions: It must be a cash purchase, and the cash-out refinancing must close within 6 months of purchase.
I suspect Fannie may eventually realize how silly the conflicting guidelines are, but the inertia that must be overcome to correct them is pretty grand.
In the meantime, please don’t forget that neither Fannie nor Freddie allow you to close a loan with an LLC holding title to the property. You must close in your name. Many investors move properties to their LLCs after closing, but be aware that doing so could trigger the loan’s “Due on Sale” clause.