Real Estate Investor · Buffalo, NY · Member since 2009 · 21 posts · 1 vote
So we are looking at buying our first property in Western New York. My question is....since we have formed an LLC should we try to finance it under the LLC or do we have to finance it ourselves then Quit Claim it to our LLC? I have heard both ways are possible, I have called Bank of America and they won't even deal with LLC's is this common?
My experience has been that the lender will make the loan to the LLC with you personally also on the note. They prefer you personally on the note.
meanwhile their are lenders, especially hard money lenders, such as my company (typically more expensive loans) that are open to making loans to the individual or the LLC but still prefer both. This is especially true if the LLC has no credit history. Hard money is usually a max of 60-75% of LTV. There is a member on here who is indicating they have 100% financing on commercial loans, pehaps they will make a loan to an LLC.
From what i've learned through BP is unless your llc is established and has it's own line of credit/ history you're going to have to finance personally and quit claim it.
And yes i hear it's fairly common for banks not to deal with new LLCs
I'm a rookie myself so i'm sure someone else on here with give you more experienced answers.
From what i've learned through BP is unless your llc is established and has it's own line of credit/ history you're going to have to finance personally and quit claim it.
And yes i hear it's fairly common for banks not to deal with new LLCs
I'm a rookie myself so i'm sure someone else on here with give you more experienced answers.
Thanks for the insight....I too am hoping that further detail can be given by some of the professionals on this site.
If you're buying commercial properties the LLC is the venue of choice, even though you're still on the note in most cases.
But for the residential stuff you're going to be jumping through a lot of hoops to get financing through an LLC. And the outcome in the present market is very uncertain. The time you lose with that might be better spend looking for your next property.
If you're buying commercial properties the LLC is the venue of choice, even though you're still on the note in most cases.
But for the residential stuff you're going to be jumping through a lot of hoops to get financing through an LLC. And the outcome in the present market is very uncertain. The time you lose with that might be better spend looking for your next property.
With that being said....when financing the property under myself, will the banks have an issue with then quit claiming the property to my LLC? I have heard that in some instances they call due the mortgage? Does this happen often?
Many lenders are staying away from investment property loans for businesses. i'm sure there are some out there, however, you will need to jump through hoops to qualify. it is difficult, though not impossible. banks have tightened up. certainly, you can't expect a newly formed llc to go in and get approved for 100k though. as with personal credit, you need to establish first.
you can most definitely do option 2: get the loan in your personal name and QC the home over to the LLC. this may or may not trigger them calling the mortgage. I seriously doubt (and have only read of once) that it will happen. keep in mind, this does NOTHING for the business credit as the loan is still in your name...its the property that isnt.
I've called beforehand on two different mortgages. One said sure and the other said "no you can't." I did it anyways, and nothing happened. Just keep paying your mortgage on time. The banks will find out anyways once they see the insurance coverage change. Make sure you move your insurance coverage into your LLC name.
My experience has been that the lender will make the loan to the LLC with you personally also on the note. They prefer you personally on the note.
meanwhile their are lenders, especially hard money lenders, such as my company (typically more expensive loans) that are open to making loans to the individual or the LLC but still prefer both. This is especially true if the LLC has no credit history. Hard money is usually a max of 60-75% of LTV. There is a member on here who is indicating they have 100% financing on commercial loans, pehaps they will make a loan to an LLC.
Ps I would not risk the quit claim route as lenders will call the loan if the transfer is not previously approved. Quitclaim also does not absolve one from the loan obligation to the lender in most cases. If you plan to do such a quitclaim or deed to your LLC then let the lender know and get their approval to prevent acceleration of the loan.
I've been thinking about doing this myself and in my research have come across the same answers. Some lenders are okay with it, others are not. Something to consider that wasn't mentioned is let the loan season for awhile in your own name. Once you have established a good payment history (12 months) then the lender would be more likely to be amenable to transfer to the LLC. You would still be responsible for the note however.