Is financing always going to be in my name?

4 Replies

Thank you everyone in advance. I'm just starting out in real estate investing and for the past 6 months I've been challenging myself to learn everything and anything I can about it. First of all, I appreciate the saftey aspect of forming multiple LLC's to protect my investments, but as I am just starting out, I'm wondering how the financing and title holding gets done. My plan is to finance my first few investment properties with capital provided by a HELOC out of my current residence, but how do I transfer those properties to an LLC (or individual LLC's) without the lender considering the transfer a Due-on-sale event? And furthermore, how will future financing be carried out, will I - personally - always be the one applying for the loans/financing? Does my future "business" ever become the borrower? Again, thank you all in advance, BP has quickly become a cornerstome to the development of my investing knowledge.

@Kregg Soltow If you get a residential loan then everything will be in your personal name. Even if you transfer title to the LLC it will not provide much asset protection because your name is still on the note and they can easily tie it back to you. At a certain point you can start getting commercial loans against your LLC - but you must have a solid track record and then you can refi everything commercial into your LLC - But the loan terms are less favorable

@Brie Schmidt Thanks for you reply! So in reality, I really have to start with residential loans in order to establish credibility. However I'm curious, are you saying that I can - down the road - refinance those notes under the LLC to fully protect them?

@Kregg Soltow - If you have substantial business assets you can start out commercial - but in my experience people need to start slowly on the residential side to build those up. And yes, you can always refi the property commercial into a LLC down the road

@Kregg Soltow At any point in time you can transfer the deed to the LLC. At that point you risk the lender calling the note due (due on sale). They may or may not. Even if they do, you can always refinance the property (which is now owned by the LLC) into a commercial type loan.

I'm not a lawyer, but I "think" liability would fall on to the owner of the property, not who's responsible for the note. Assuming everything else is rock solid and you made the transfer to the LLC prior to any issues, I'd say you're okay even if you have the conventional financing still in place. Regardless of that, high liability insurance ($1m+) will go a long way when it comes to protecting you. Wouldn't hurt to double check this with a lawyer.

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