Advice on Financing 4plex

10 posts by 7 users

No avatar medium Keith J.
Real Estate Investor from Lombard, IL
22 Posts
4 Votes
1 Award

Keith J.

Real Estate Investor from Lombard, Illinois

Feb 06 '13, 07:31 AM

Looking to place an offer on 1st property. A 4plex. My question is related to residential financing and an LLC.

We qualify for a good 30 yr residential loan under our own name. Our intention was to purchase the property under our names and immediately transfer the deed into the LLC's name.

What I have heard from an attorney is doing the purchase this way opens us up to more personal liability.. Because the financing is coming from us personally and not through the LLC this is a crack in the veil of the corporation.

We are finding it much harder to find commercial financing since this is our first property and we do not have a track record of success.

We both have excellent credit and a good amount of cash on hand. We would like to leverage somewhat though to allow more purchasing opportunities while prices and lending rates are low.

Can anyone chime in on the risk vs reward of using the residential loan but transferring the property into an LLC?

Medium 1399535253 avatar forchunet Glenn Espinosa
Rehabber from Alexandria, VA
446 Posts
138 Votes
4 Awards

Glenn Espinosa

Rehabber from Alexandria, Virginia

Feb 06 '13, 08:09 AM

That and the bank calling the loan due when they find out it was transferred over to an LLC.

Never heard of it happening but just from what I've read here on BP.

Keith J.

Real Estate Investor from Lombard, Illinois

Feb 06 '13, 08:27 AM

The lender already stated that transferring to the LLC with a quit-claim deed is not an issue for them.

They did say that doing a refi would be impossible. But given that rates are under 4.3% I don't see that as a big deal.

But they are the ones who advised consulting with a lawyer regarding the liability ramifications of doing so.

Medium 1448398806 avatar mi George P.
Investor from Livonia, MI
3030 Posts
789 Votes
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George P.

Investor from Livonia, Michigan

Feb 06 '13, 09:37 AM

the fact that the loan is in your name exposes you to the risk, i believe.

however, getting a loan under LLC is impossible. noone will do it. they want the "security" of you backing up the loan.

also comercial loans are crazy expensive (40% down with 8% APR or there about).

having said that....we buy ours in our names then transfer to LLC via quit claim. whatever happens happens, i suppose..

Keith J.

Real Estate Investor from Lombard, Illinois

Feb 06 '13, 10:47 AM

We have no problem backing up the loan personally, but want to loan to be in the LLC's name if possible.

From what I have found you can't really get a mortage structured like that. You would need a standard business loan under the LLC.

If we are missing something please chime in.

Guess we are hoping for the best of both worlds (convenience and rates of a residential loan and security of having the property in the LLC's name). Maybe what we want does not exist.

Medium 1398860465 avatar rjkeefer Joel K
Real Estate Investor from Bloomington, IN
119 Posts
8 Votes
1 Award

Joel K

Real Estate Investor from Bloomington, Indiana

Feb 06 '13, 03:22 PM
1 vote

We had the same dilemma and chose an umbrella policy on top of rental insurance - read about it here on bp so there are already some good forum discussions about this topic I think. The umbrella certainly adds to monthly insurance bill but no quitclaim/LLC//bank calling notes problems and we feel protected.

No avatar medium Sorab G.
Investor from Walnut Creek, CA
38 Posts
11 Votes
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Sorab G.

Investor from Walnut Creek, California

Feb 06 '13, 03:30 PM

I have 2 quadplexes, i just deeded them to my corporation. no issues. I also have the umbrella policy, just in case.

Keith J.

Real Estate Investor from Lombard, Illinois

Feb 08 '13, 11:25 AM

Met a Commercial Lender for a small private bank in the Chicago area at the WCRT meeting last night. They offer the exact type of financing that we are in need of. Good to get confirmation that what we need really is available.

No avatar medium Account Closed
Real Estate Investor from Chicago, IL
1662 Posts
192 Votes
6 Awards

Account Closed

Feb 09 '13, 11:31 PM

@Keith J. glad you made a solid connection. Yes, as you saw, there were many at the meeting that said it was possible and actually not overly difficult.

Just have to make the right inroads to find what you need sometime. Information and connections are solid tools in this business, as with many others.

Medium 1399661807 avatar yellowdoorenter Jackie Hook
Wholesaler from Butler, IN
2 Posts
0 Votes
1 Award

Jackie Hook

Wholesaler from Butler, Indiana

Feb 13 '13, 06:53 AM

You could see about having the loan in the LLC name but be the guarantor on the loan.

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