Need Properties in LLC for Commercial/Portfolio Loan?

Question

I am getting to the point where I will have to move from conventional loan products to commercial/portfolio loan products because of strict conventional guidelines and underwriting. My properties are SFR's, duplexes, and triplexes. For those with experience in these loan products, do all my properties need to be under the ownership of an LLC or other business entity to qualify for such loans? Or could the properties remain under my name? I am reaching out to lenders, but wanted to see about others' experiences. Thanks in advance.

Sasha Fukuda · Answer

So you have several small multifamily properties on residential mortgages, and they're owned in your own name? And you plan on adding other properties in the future that are bought with commercial loans, and you're asking whether you'll have to buy those properties in an LLC?

Judging from my experience, i don't think the commercial properties would need to be in an LLC. I was in a similar situation as you. I own several small multi family properties in my own name. I became interested in a 5 unit a few years ago that didn't qualify for a residential loan, so i bought that with a commercial loan. I put it in an LLC, but only because i wanted to. The bank didn't seem to care.

So my best guess is that it's going to be up to you. However, i'm curious why you prefer not to use LLCs when you have the opportunity?

Erik Estrada · Answer

Hey Sean,

In terms of requirements, most portfolio and blanket lenders require that the properties be the same type (so all SFRs, duplexes, etc..), a minimum loan amount of $50,000, LLC is required and a decent credit score. You should consider that most lenders of this nature will not allow partial releases so you would have to sell or refinance all properties.

Robin Simon · Answer

I believe you are referring to switching to DSCR Loans. Lenders differ, but usually it would still be OK to do loans as an individual (LLC or entity not necessary).

For us, we lend DSCR to either individuals or entities in most states, but a handful we do in fact require it to be an LLC or other corporate entity

Fully Eligible States (Lend to Individuals or Entities)

• AL, AK, AR, AZ, CA, CO, CT, DE, DC, HI, ID, IL, IN, KY, LA, ME, MD, MA, MI, MN, MS, MO, NE, NH, NJ, NM, NY, NC, ND, OH, OK, PA, SC, SD, TN, TX, VT, WA, WV, WI, WY

Partially Eligible States (Lend to Entities Only)

• GA, FL, IA, MS, MT, RI, VA

Zach Taylor · Answer

@Sean Ross To qualify for commercial/portfolio lending products for future acquisitions. These lenders view and qualify the borrower based upon the performance & profitability of the assets they own. But I am unsure if these assets need to be held in an LLC instead of my personal name.

Sean Ross · Answer

Not sure what you are trying to achieve, all your properties to be in LLC to qualify for what loans ? Are they not already in LLC or are they already have mortgages ?

Are you trying to refinance ? Are you trying to buy a new property? Yes mostly all commercial loans are for business entities only.

Need Properties in LLC for Commercial/Portfolio Loan?

Need Properties in LLC for Commercial/Portfolio Loan?

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