I'm in the process of buying a property for rental (buy and hold). It's a HUD home and only currently opened to offers from owner occupants.
My private lender will only finance if I am buying with my LLC as such I plan using conventional lending (20% down).
My question is can I switch it to my LLC afterwards and if so how do I do that? Are there any consequences?
@Razak Amadu check with your lender and tell them your intentions, you should be fine. I need to eventually transfer my property into an LLC too.
@Razak Amadu are you trying to skirt around the investor waiting period by posing as an owner occupant?
If so, its a very bad idea....
Can you explain further?
There are two separate components to the question that would require some clarification.
1. financing: are you asking if you are ABLE to purchase in your personal name for better financing and then transfer the property into the LLC after? This type of transfer can sometimes trigger an acceleration known as the Due on Sale Clause, which allows the lender to immediately call their note back (meaning you need to pay the entire note back within 30 days or transfer the property back into your own name.) Though many financing institutions are changing their policies regarding this, you need to look into it before pulling the trigger. One strategy I have seen to work around this transfer issue is through the use of a Land Trust, as described by the article I linked - you can get the beneficial financing available in your personal name and the liability protection of the LLC this way.
2. financing terms: if you do not abide by the terms of the note than the lender can pull the note. so if you are planning on using the property for anything outside of what the agreement states, the lender has the legal right to recall the note. You would need to clarify your intentions for me to get any more specific, though.
@Razak Amadu HUD has an initial period where, as you stated, only owner occupants can put in offers. If you are buying it as a rental, you must wait until that initial period is over.
If you are trying to put an offer in early by pretending you are an owner occupant, and then transferring the property into your LLC, and make it a rental, that is illegal, and a felony.
Dont do that, just wait....
@Bernadeau C. Was yours a Hud home as well?
If HUD terms are anything like FHA terms, you would need to live there at least 1 year. Then, you should be able to refinance with the LLC as the new owner. Otherwise you would have to wait until after day 15 on the market to bid as an investor.
@Razak Amadu no it was not
@Shawn Rasmussen well noted. Thanks!