Residential development in LLC or individual's name?

Question

Hi All,

I have two adjacent lots in Baltimore City on which I plan to build two two-unit dwellings i.e. four units in total. For financing purposes - mind you I am looking 18 - 24 months out to start construction, so I am planning ahead - can you offer the pros and cons of putting the title in my name vs in an LLC for the immediate term? Are the chances of me obtaining construction finance options better if the properties are in my name or in an LLC? Thanks for any thoughts and guidance. Cynthia

Ned Carey · Answer

Generally  what @Russ Draper says is true. It is easier to get financing for 1-4 unit properties in your own name.  However with new construction the type of loan required the opposite may be true. The lender may require it to be in an LLC.

Since you already apparently own the properties, I would talk to lenders and see what your options are and see what the lender requires. I wouldn't change title until you have a lender in place.

It goes without saying that you will need to guarantee the loan personally even if in an LLC for a project like this.

Russ Draper · Answer

How much history does your LLC have?  If this is a new LLC, the lender will likely want either a personal guarantee or just won't do it in the name of the LLC.  Unless you go with hard money lenders, in which case you'll need to have more "skin in the game" (money).

Cynthia Hartley · Answer

Your advice makes sense @Russ Draper and @Ned Carey. I will keep the properties in my name while I go through the design and permitting process. As I look for financing, I will then see what my options are and the requirements. Thank you for your guidance.