Getting financed with an LLC

11 Replies

Hello BP, this is my first time posting I'm new to investing and I want to buy and hold properties, my question is, Is it hard to get Finace with an LLC, and should you get an LLC before you actually purchase your first property.

Welcome to BP.

The short answer is that cheap government subsidized money from Fannie Mae, Freddie Mac, FHA, etc., requires the purchase be by a human buyer, not an entity (LLC). From a financing perspective, for your first set of properties, it is easier to put the property in your name.

Don't get an LLC for a single family purchase. Put it in your own name. If you are worried about liability, get an umbrella insurance policy, plus regular insurance for the rental property. Make sure the umbrella insurance policy is at least 1 million. That should cost you about $400-$500.00 a year. If someone sues you, they'll for the insurance that has the bigger pockets. No pun intended :-)

Right now I have 46 front doors and soon to be 55-60 front doors. Presently, I have a 2 million umbrella policy rand will be upping that to 4 million soon. That will cost me about $1500-$2000.00 a year. No brainer. I do have an LLC for each apartment complex. That is for other reasons that are too convoluted to discuss here. Single family NO LLC. I see no reason for one.

Have a great turkey day all!!

Swanny

Using an LLC to protect assets doesn't make sense when you don't have a lot of assets. LLCs change your financing options to commercial only. They also change your insurance options some in my experience. You can go talk to a bank about your ability to get a commercial loan, that is who you would be dealing with if you get an LLC. A commercial loan is based on the property. We have a 6 unit and they looked at the performance of that property for financing as well as our personal finances. For buy and holds it is different then Flips so if you have interest in reno/flips there may be different input.

Sounds like your question is - "Will setting up an LLC, allow me to get financing for my first purchase?".

Typically banks won't lend to an LLC until they have an income/credit history.

Like others have said, FHA might be great first option.

Best wishes! 

Thanks to all who have shared there insight.  I don't know if you've been told but its awesome what you guys do and,  that there is a forum where us little fish can come to get useful knowledge and apply it to what it is we all are trying to accomplish.

Thanks again,

In my experience it has been easier to get financing through my LLC. Even when my LLC was brand new and had no income, I had no issue. Typically LLC financing is going to be some sort of portfolio lender. That is always easier than doing some sort of personal fannie mae type of loan. For the foreseeable future, you will have to do a personal guarantee on any LLC loans anyway and they will loan against your person credit. If you have good credit and a solid source of income, getting an LLC loan will probably not be hard-assuming the bank is confident you know what you're doing.

That being said, buy and hold would be good to do in personal name with some fannie mae money if your goal is cash flow.

Personal experience most lenders I've worked with don't allow LLC loans because they consider it a "business loan" and not a mortgage on the subject property.

I fact, my last lender made me sign an agreement saying I'm not at any point going to try and transfer the loan from my name to an LLC.

With that said, the last portfolio lender I spoke with said they can do an LLC or my name. Whatever I wanted. I think it all comes down to the lender.

Originally posted by @Rashidi Brown :

Hello BP, this is my first time posting I'm new to investing and I want to buy and hold properties, my question is, Is it hard to get Finace with an LLC, and should you get an LLC before you actually purchase your first property.

I originate large commercial loans and typically the buyer will need a single entity LLC to complete the purchase. Makes sense for larger deals.

Mark

Originally posted by @Luka Milicevic :

Personal experience most lenders I've worked with don't allow LLC loans because they consider it a "business loan" and not a mortgage on the subject property.

I fact, my last lender made me sign an agreement saying I'm not at any point going to try and transfer the loan from my name to an LLC.

With that said, the last portfolio lender I spoke with said they can do an LLC or my name. Whatever I wanted. I think it all comes down to the lender.

 @Luka Milicevic

What portfolio lender are you referring to in the Nashville area? We are looking for other lending alternatives with our LLC?

Originally posted by @Thomas P. :
Originally posted by @Luka Milicevic:

Personal experience most lenders I've worked with don't allow LLC loans because they consider it a "business loan" and not a mortgage on the subject property.

I fact, my last lender made me sign an agreement saying I'm not at any point going to try and transfer the loan from my name to an LLC.

With that said, the last portfolio lender I spoke with said they can do an LLC or my name. Whatever I wanted. I think it all comes down to the lender.

 @Luka Milicevic

What portfolio lender are you referring to in the Nashville area? We are looking for other lending alternatives with our LLC?

 Cedarstone bank. Contact is Hank Stuart. He deals with investor loans and really knows what he is talking about.