1-4 Unit Commercial Mortgages

13 Replies

Just did another Commercial Mortgage through my LLC on a two-family property. I do commercial mortgages on all of my buildings because it is in my LLC for liability purposes (as far as I know, it has to be a commercial mortgage when in an entity such as an LLC) . It seems that most Commercial Mortgages are ARM loans. Does anyone know if it is possible to get a fixed rate mortgage with a Commercial Loan for 20-30 years all in my LLC?

Thanks BP community!

@Danté Belmonte I was pre-qual for a 3 unit through my LLC 20% down on a fixed 30 yr rate was up there though around 7% . I didn't end up purchasing the deal but the loans are out there .

The big elephant in the room is the title transfer. Many investors (maybe myself included) get a 30 or 15 year fixed rate residential loan in our individual name and immediately transfer title at the closing table with a quitclaim deed. You may pay $400-500 for the title transfer but get to capitalize on the most favorable Fannie/Freddie backed residential loan terms. I'm in the low 3% range on a 15 year fixed with 3 points on a duplex I'm closing on in the next few weeks. Definitely consult with your own attorney for advice on your individual circumstances.

On the commercial side, yes they are variable rates but some local lenders (I have this exact loan with Empower) might lock for 10 years on a 15 year loan, 20 year amortization on very competitive rates. That way you are saving the costs of the title transfer. It is also flexible if you're buying a package of properties or 5+ unit property that has to be bought commercially.

There are also some national lenders who offer asset based lending to LLC companies directly. One company specifically lends nationwide on 30 fixed rate loans in the 5% range. I believe only to 740+ credit scores, but there are a lot of great options out there.

@Greg Miller Greg, I am aware of transferring deed or title after closing or at closing from your own name to your entity. But I have been hearing that a lot of investors have been doing that resulting in the financial institute calling the note due, therefore leaving the investor with a $200k bill due within 30 days. I feel that is a risky play.

Very interesting. Myself or no one on my extended team: attorney, agents, etc. have heard of lenders actually calling the note due as long as it is performing. I typically even discuss this with my loan officers to be transparent, and they pretend not to listen but don't take exception. I am "Fannied out" now, but maybe this strategy does have some risk if lenders actually are doing this. I still think it might be more or a threat than something they would follow through on. I have loans with 8 different institutes including national banks like Wells Fargo and even they get the insurance in the name of the LLC with individuals listed as additionally insured - making it very clear what we are doing, and they have never taken major exception. Your strategy certainly eliminates that risk entirely though. Hope it works out well for you!

I’m glad to hear someone locally hasn’t had issues with this. I’m going to talk to my attorney and a few lenders on this one. With rates at all time lows. I want to lock in those super low rates. Thank you for your help!

@Danté Belmonte FNMA allows you to transfer your property into an LLC without triggering due on sale clause.

Look up FNMA:

D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (11/08/2017)

https://www.fanniemae.com/content/guide/servicing/d1/4.1/02.html

@Brad L.

Yes, I have discussed with my attorney in detail. You are correct that personally paying the mortgage on an LLC owned property technically could be viewed as personal transaction. He viewed that risk as very minimal as long as the property is fully owned, operated and managed by the LLC company. Good question though!

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