Breaking News for Investors

On August 1, 2008, Freddie Mac changed its guidelines.  Those changes are affecting investors who finance the property in their portfolio and have those properties under the entity, limited liability corporation (LLC). 

Freddie Mac backs many of the conforming loans on the secondary market, so any changes in the rules is very important and should be headline news; hence, this news release. 

The changes are as follows:

• Freddie Mac will no longer approve refinance for any property that has been under a limited liability corporation entity for the previous six months. 
• Freddie Mac is limiting the number of properties the investor can have financed to four not ten as in years passed.

The solutions to these changes are as follows:

• Cash is king.  Allow the equity that you have build in the properties you currently own acquire new properties not using a loan; however, with this option you will have to factor in the cost of repairs.  In other words, the cash has to cover the purchase and the repairs.
• All properties that are acquired must be protected.  The way they are protected will still include the LLC.  It will just be a trust that will act as a go between.  The property will be held under a trust with the beneficial interest being the LLC.

Remember, these changes do not preclude you from owning properties.  It just changes how they are held and how many can be financed at any given time. Talk to an attorney about putting the properties under a trust and having the LLC as beneficial interest in the trust.

Written by Serena Brown

http://www.taylorbrownrealestatetalks.com