Obtaining a loan as a partnership?

Question

My business partner and I are just getting into real estate investing and have some attractive target properties we are looking at.  We’d like the protection an LLC provides but know that financial institutions are unlikely lend to a LLC.  What are some other methods to obtain the funding but also keep the property in the partnership’s name?

Heith Reade · Answer

Hey Will, there are lenders that will allow you to borrow in the name of the LLC and not require a personal guarantee. They are not super common in the marketplace and therefore they are filling a void which they know and tend to account for in their rates and fees. But, what you are asking for is possible.

Ned Carey · Answer

@Will Mobley a partnership and an LLC are two entirely different things. It is a little harder right now to get a loan in an LLC but very doable. You will pay higher rates and get less preferable terms than owning a property in your own name when buying in an LLC. However I suspect the same is true when buying in the name of a partnership.

The higher costs of owning property in an LLC or other entity is just one of the costs of doing business. While holding in your own name is a legitimate way of owning investment property is comes with risks and benefits vs owning in some entity. You have to weigh those risks and benefits.

Kevin Sobilo · Answer

@Will Mobley, Local/regional community banks and credit unions will give portfolio loans to LLCs. However, you and your partner will have to personally guarantee the debt as well (basically cosign).