Pros/cons of SPVs (Special Purpose Vehicles)?

[Brian Kantor]

Hi, there. Some partners and I are looking to acquire a run-down motel, renovate it and repurpose as more of a modern lodging experience.

For context, my background to date has been in buy/hold SFHs and a duplex STR.

When looking into legal entity structure, we came across SPVs/SPEs, which I was surprised not to have heard much about in the past here or in any of the books I've read.

Would love to hear some cons for this type of structure. The pros seem obvious—asset protection for the LLC member owners—but what's the catch? Does this only work in syndications (aka, does a property/investment need to go through SEC regs for this to work)? Do commercial lenders look at these more skeptically than a traditional LLC entity because it's harder for them to go after owner assets in the case of default?

Any stipulations, guidelines or red-flags?

Many thanks!

-Brian

[H. Jack Miller]

most lenders will require it on a deal of any size, Lenders will not be skeptical as this is very normal, in fact if you come in letting them know that's how your going to take title, they will understand that you know what your talking about. The down side for a borrower is if the loan does not preform the lender can take the LLC ownership thought an article 9 UCC sale