Having Trouble Getting a Loan for an LLC? We’ve Got You Covered

by | BiggerPockets.com

This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

Good news! Consider this lending problem solved.

Time and again, I hear complaints from my clients and fellow investors about the difficulty of getting a loan for an LLC. They’re usually confused, because they already know that using a traditional LLC (or ideally, a series LLC) is the best way to manage their property. As is often the case in my practice, the person is asking the wrong question. Investors ask me how to get a loan for an LLC, when the better question is, is there a better way to get the loan they need?

There’s a better way to set up your LLC or SLLC to serve you, but it starts at the very beginning. Follow these simple steps and you won’t be awake at night stressing about taxes or due-on-sale clauses. Hell, that’s my job. But I’ve found that just taking these steps, in this order, helps me avoid a lot of these problems altogether. Let’s get started.

Related: Top 3 Real Estate LLC Myths: Busted!

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Step 1: Buy in Your Name

As a general rule, you are going to have a much easier time securing a loan than an LLC. Maybe you’re eligible for a personal or business loan. Many of my clients have good home equity and use funds from their HELOC to purchase rental properties or second homes. If you’re absolutely clueless in this department, talk to your banker. You may be eligible for a variety of loans and simply not know it.

Step 2: Transfer to Land Trust

This is a crucial step, both for protecting the land itself and avoiding the due-on-sale clauses that come standard with most loans. In short, most loans must be paid back in full if and when the property is transferred. However, transferring property to a land trust does not violate the due-on-sale clause. You get to keep your loan and avoid the whole (typically fruitless) hassle of attempting to get a major creditor to give a loan to the LLC itself. This handy dandy loophole allows you to move and manage your property without having to cough up a bunch of cash.

As an added bonus, the land trust grants you, the investor, anonymity. The anonymous land trust is nearly impossible to penetrate in court. As those who have read our other articles on anonymity will understand, it is nearly impossible to be sued if nobody can prove you own a property. The land trust piece helps prevent lawsuits by legally separating you from the property itself.

Related: 3 Benefits of Holding Your Properties in an LLC

Step 3: Land Trust to LLC

Once you’ve transferred your property into a land trust, simply deed the property to your LLC.

Last but not least, you will need a solid operating and property management agreement for your LLC to effectively manage the property in the trust. Your attorney can help you sort out the details here while preserving the anonymity you have already built.

Do you have any experience with this method of getting your loan? Share in the comments below!

About Author

Scott Smith

Scott Royal Smith is a real estate asset protection attorney based in Austin, TX. His firm, Royal Legal Solutions, designs asset protection strategies exclusively for real estate investors. As an investor himself, Scott is sensitive to the needs of real estate investors; as an attorney, he maintains a working knowledge of the best legal strategies available for preventing lawsuits. Connect with Scott here on BiggerPockets or visit his website, www.royallegalsolutions.com, for more information about asset protection for real estate investors. Check out all of Scott’s previous work for BiggerPockets here.


  1. Better yet, have the land trust set up so that the member is an LLC for further anonymity and to avoid the transfer fee to the LLC. Have use this frequently and it works well.

    • Scott Smith

      Hello! Thank you for taking the time to read the article and commenting. Several of my clients are based out of MO, and also owning rentals in MO. If you have additional questions, please feel free to message me and I would be more than happy to respond. Thanks again!

  2. Gordon Cuffe

    One of my lenders in CA will do a conventional loan for an LLC by allowing the LLC to put the property in the person’s name at the close of escrow. Once the loan has funded the individual can put the property back in the name of the LLC. No need to put in the name of the individual then wait for a number of months then do the refi.

  3. Cindy Larsen


    Wow! That was helpful. I will research land trusts next. How does the land trust stop the lender from using the due on sale clause?

    What happens if you buy the property in the name of three partners, who contribute 2.5%; 2.5%, and 95% of the downpayments and closing coats, then, when you get the property into the LLC, the minority partners contribute additional funds to the partnership, changing the equity percentages to 10%, 10%, and 80%. Can the loan be called due because of the change in percentages of ownership? Or does the lanf trust thing prevent that? Do you have to report changes in percentages of ownership? I am hoping this does not count as a sale to the IRS, or to the county tax assessors that charge excise tax, etc.

    Can you point me to any resources addressing these questions?

    • Cindy Larsen


      Further research has lead me to the conclusion that putting a property into a land trust and then an LLC will in no way release you from the due on sale clause. The minute you change the ownership of the property by having the LLC own it, or by having a multimember LLC so that your partners now own part of the property, the due on sale clause is enforcable.

      The Land trust does nothing legally to exempt you from the due on sale clasue. All the land trust does is attempt to hide fom the bank the fact that you have changed the ownership Of the property. With how easy it is to get information about people and properties, I would not want to rely on the bank not finding out, especially when the potential for lending out that money for a higher interest rate motivates them to investigate. besides that, it seem unethical to me. I signed the mortgage with the due on sale clause. If there is not a legal way to avoid having it enforced, then I have, litterally, no right to perform what is in effect fraud by transfering ownership of my property when I said I would not do so, and hiding that fact.

      So, it seems to me that this land trust strategy is risky, unethical, and possibly fraud.

      • Scott Smith

        Hello! I appreciate your thorough and well thought out response! Transferring to a trust does not violate the due on sale clause. Also, you can list the LLC as the beneficiary of the trust. I’d love to further our discussion, message me if you are interested. Thanks!

      • Scott Smith

        Hi Cindy,

        Most states view land trusts as Estate Planning tools. For this reason, it’s not the same as executing a transfer directly to the LLC and doesn’t tend to set off alarm bells at the bank. Further, trusts are private documents. Transfers of property into LLCs are public record. The due on sale clause isn’t triggered, particularly if the property is left in a land trust, which is THEN incorporated into a Series LLC structure. There are multiple ways to execute this type of transfer completely legally. If you’re uncomfortable with it, well, you don’t have to. But there’s nothing fraudulent about using these tools to protect your assets and get yourself the best options available. What you decide to do with your own situation is between you and your attorney.

        In my own practice, I’ve never seen anyone even get a letter from the bank by executing this correctly. There’s nothing inherently risky or fraudulent about it.

        The worst case scenario, which I’ve never even seen play out, is that the property would be deeded back to the original buyer’s name.

    • Scott Smith

      That’s a great point you raised. Community banks do tend to be easier to forge relationships with generally. And you’re more likely to get better terms in particular if you do choose to get a loan to an LLC. But many newer investors would struggle with this, particularly if the LLC is new.

  4. Jerry W.

    Scott, I have some disagreements that maybe you can clear up. First you can transfer your property into a TESTAMENTARY trust because it is legally still you, you are doing it for inheritance purposes so federal law recognizes you and your trust as the same person. If your LAND trust is not a testamentary trust then it violates the due on sale clause and the bank may call your loan. Next if your trust by whatever name you call it transfers the land to an LLC the due on sale clause can be called immediately. The bank will know you did the transfer because you MUST provide proof of insurance. The insurance must be in the name of the LLC or it is VOID. If the name of the insured is the trust or you but the deed is in the LLC your insurance is void, then if you get sued they come after you and you have no insurance. As to anonymity, how are you anonymous if your name is on the mortgage of the property? Don’t you think that would make even the least suspicious sue happy lawyer think you may be involved somehow? Then you signed the deed putting it into the trust right? You signed the deed putting it into the LLC from your trust right? You write the checks to the insurance company out of the LLC right? If you hire other people to do those management things for you it will cost you a fortune and they can run the business not you. If they sue or depose one of those folks you think they will lie to protect your anonymity? No. Now if there is a lawsuit and your name is on the bank account don’t you think they will depose you too? Will you lie about your involvement and risk going to prison for perjury? Especially if your name is on every legal document connected to the property?
    If I am wrong here please let me know. I am a bit rusty on this as I have done a suit involving an LLC or corporation for several years. If I am right then all of these folks wanting to go spend money on an attorney to do this will have wasted their time and money. Please enlighten us. If there is some magical way to never be sued again by landlords I would imagine every landlord would have it. Please explain how I am wrong about any of these.

    • Salome Dcunha

      Thanks for asking this detailed question @Jerry W! I’d be curious too because my partner & I are trying to buy our first property and wondering how to navigate the due-on-sale clause piece because we know we need to run our buy and hold rental in there for asset Protection in our situation.

    • Edward B.

      Jerry, in this strategy you don’t actually transfer the deed to the LLC or the lender would be notified immediately because it is a public transaction. You reassign the beneficial interest of the trust to the LLC, which is not a matter of public record. The theory being that the beneficiary of the trust typically has all the liability. Then you could have the LLC named as an additional insured, much like property managers like, which may or may not dime you out. It’s a calculated risk.

  5. Chris Field

    I have never had trouble getting a loan in an LLC, my bank actually requires that each property have it’s own LLC.

    They are all recourse anyway.

    Maybe people are having trouble because they are talking to the wrong banks or trying to do the wrong types of loans?

  6. Edward B.

    I agree that this is potentially misleading without all the facts. This strategy does not “bypass” most if not all due on sale clauses. I’ve looked into this a lot and once you transfer the beneficial interest from yourself to anyone or anything else you are likely in violation of the clause and the bank is within it’s right to accelerate the loan. What this does is obscure what you are doing in transferring the interest in the property, but there are a lot of ways to accidentally dime yourself out to the lender. One of the most common is by changing your insurance to include the LLC, which notifies the bank, which may cause them to start asking questions. This strategy is a calculated risk and you should still be prepared to remedy the situation if the lender has an issue with it, which they may or may not allow you to do. The reality is, the vast majority of lenders don’t care if you transfer the property, at least not now. For the few that do or if that changes, this may make it more difficult to discover what you’ve done, but it doesn’t clear you if they find out and choose to push the issue.

  7. George Wengler

    I do not see any replies from the author of this article to any of the comments that have been made. I would think that this “Article” is no more than an advertisement to drum up business. Scott, please chime in and tell us otherwise…

    The comments bring up a lot of good questions to research and do your own due diligence and not blindly believe everything you read in an article.

    I’m left wanting to know more…

    • Scott Smith

      Hello! Apologies on the delay in response and if you feel that this is more of an advertisement – that was not my intention. I believe in getting this information out. If you have additional questions, feel free to message me, I would love to discuss further!

    • Isaac Agbolosoo

      It works for Other people. But personally, to me, this strategy is for large-scale REI. Those who want to make payments to a trusted person. That person signs the legal documents, make payments,etc.. owners information kept secret.
      I still don’t see the point in paying huge sums of money to an attorney to fill out a 1 page LLC application. This can be done yourself.

      • Scott Smith

        Thank you for taking the time to read the blog and comment! I appreciate it! My clients are small-scale and large-scale, and in between. Payments are made to you if set up correctly (takes several documents), not to a trusted person. If you would like to discuss further, please message me. Thanks!

  8. Daniel G Zuck

    Maybe I’m missing something?

    If you purchase in your name which is likely easier to get a loan, then transfer to a trust. Doesn’t that leave a record of your name in this process? EG: anyone can see the property sold to you then transferred over?

  9. Dan Tsunekawa

    Thank you for this article Scott. I am familiar with this strategy when investing in properties on my own, i am curious how this plays out when you have a partnership. For instance, if i get the loan on the property in my name, and then we transfer title into land trust which is held by our LLC 50/50 partnership, then next time i go to get a loan, doesn’t that mess up my DTI cause i own 100% of the loan and only 50% of the business’s income?

    Thank you

  10. Mike S.

    Two remarks on your post.

    First of all, you don’t deed your property to the LLC. You initially warranty deed your property to the land trust. Then you assign the beneficial interest of the land trust to the LLC. That is a major difference, as the assignment of beneficial interest is a private unrecorded transaction, that keeps the LLC out of the picture for the lender.

    Second, while in theory land trust provide anonymity, it is only the case if you buy the property directly into the land trust. If you buy the property in your own name (and that is what you need to do with a personal mortgage usually), then the note and the initial recording under your name will be available in public records. It is true, that a simple search by address or owner name will only return the land trust, but it is only one click away from the historical data.

    I have seen some concerns about the LLC being shown in the insurance. In fact the property should be insured under the name insured of the land trust. The LLC would be added as additional insured. You can also be added as additional insured as the principal of the LLC.

  11. pavel shemyakin

    Scott, i am no lawyer, but it appears that § 591.5 Limitation on exercise of due-on-sale clauses, and 12 U.S. Code § 1701j–3 – Preemption of due-on-sale prohibitions contradict what you are saying.

    It clearly states: “a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property”

    Could you please expand on this?
    Thank you so much!

  12. Scott Smith

    The St. Germain lists this type of transfer under it’s exemptions (d), “a lender may not exercise its option pursuant to a due-on-sale clause upon… (8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property…”

    This is stating that this type of transfer is exempted from the Due on Sale Clause. Even though your name is not directly listed as the beneficiary, you can prove ownership of the trust and still fulfill that role. The reason for this is that the Land Trust is considered an estate planning tool, not an asset protection tool.


    That is a great question, thanks for bringing it up!

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