Conventional Lenders for LLC's - With Personal Guarantor

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Conventional Lenders for LLC's - With Personal Guarantor

Steve M.
Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes

Hey Guys ....

Basics:
My Credit Score: 720+
Income: $100k+

My LLC owns 2 properties outright - there is no note on either.

Looking to start financing a few properties, and walked in to BofA today to speak with a Mortgage Consultant. Within 2 minutes, they told me BofA doesn't loan to LLC's even with a personal guarantor.

My question is this ... What "large" banks (ie: Suntrust, 5/3rd, Wells Fargo, etc...) loan to LLC's that have a personal guarantor (me) ????

Currently only have 1 mortgage which is my current residence.

Thanks!

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
15y

Go Here:

http://www2.fdic.gov/idasp/main.asp

Type in State and set display results to 100 per page.

Over 191 banks in Tennessee and I am sure one might lend to you.You just need to hit the phones.Ask quickly on the phone that you have an LLC etc. and do they offer any programs.

Every bank is different on what they will and won't do.It depends on how healthy they are,the mix of loans on the books,and default levels of each asset class.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    Go Here:

    http://www2.fdic.gov/idasp/main.asp

    Type in State and set display results to 100 per page.

    Over 191 banks in Tennessee and I am sure one might lend to you.You just need to hit the phones.Ask quickly on the phone that you have an LLC etc. and do they offer any programs.

    Every bank is different on what they will and won't do.It depends on how healthy they are,the mix of loans on the books,and default levels of each asset class.

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    WebsiteView Page
    3Reply
  • Darryl Dahlen
    Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
    15y

    I don't do residential loans, but I did a quick search for you on another site.

    It doesn't look like there are many conventional options, but I did find the name of lender come up. Check out Amtrust to see if they can help you.

    2Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    I don't know of any.

    Why are you married to using large banks? Won't a small, regional bank be a better fit for this need?

    0Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y

    thanks for the replies guys ... i'm open to regional, small banks as well :) just was wondering if any of the "larger" banks were open to these options!

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    There may be, but the small regional banks are generally better to build a relationship with. I would recommend talking to your local REIA or angel groups and seeing who they recommend.

    1Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    15y

    It may not work as smoothly now (although I would not know why), but I have done this a few times with 2 LLCs in the past with Chase and Wachovia. There is no need to tell the "E" at the local bank the details of the title of the property. Submit 1003 in your personal name(s) (as Individual(s)). Get approved. Somewhere along the line the underwriter will say 'you don't own the property' and then let your closing attorney' intervene to let the underwriter know that the LLC was created (perhaps even by the closing attorney) for his client's benefit. The closing attorney will provide two deeds as part of the closing package; one deed is LLC->Individual, the other is Individual->LLC. All documents are signed by the borrower as an individual. It is possible that the underwriter will want the first deed recorded a day before closing. No problem. The property is then deeded back to the LLC. No DOS/transfer issues and you can keep taxes in the LLC (1065), which is good to keep accounting costs down. Minor variations by lender, but that's the gist of it.

    2Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Great info Chris!

    Do you see big lenders doing something like this in the current environment? Why all of the hullabaloo about this? Do the originators need a set of docs to sell the loan or something?

    0Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    15y

    I take it you are after low-rate, long-term conventional financing and not commercial/portfolio financing.

    Can you take the loan in your personal name, then quit claim to your LLC? Are there concerns with triggering due-on-sale (very unlikely) or insurance policy issues, or what?

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    That is always an option David, but it makes the loan callable no matter how remote the risk is. With interest rates likely to rise I would want to get buy-in from the lender too so that I wasn't hedging the bank's interest rate risk in the event it becomes advantageous for them to accelerate the note.

    My guess is that Fannie/Freddie guidelines will force the OP to take title personally unless he can execute something like what Chris is talking about. Small regionals can issue conventional loans too, but they are ultimately going to be governed by the same lending constraints of the big guys if they want to sell the loan. That is why I was asking about why having a big bank was an issue. The smaller banks are likely going to be more receptive to something like this.

    1Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    15y
    Originally posted by Bryan Hancock:
    Great info Chris!

    Do you see big lenders doing something like this in the current environment? Why all of the hullabaloo about this? Do the originators need a set of docs to sell the loan or something?

    Missed a few posts... watching the Philly vs. Pitt hockey match. Top quality. Congrats to PA for having the best hockey in the world right now!

    I would think this would work today. The originators just needed my personal info/docs and the LLC was a non-issue. There was no issue with the underwriting rules since there was a person signing. They want a person signing the docs (w/o 'member' or 'member/manager') hence the deed transfer. Everything fit the underwriting rules. Having the property in an LLC was (probably still is) a non-issue.

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    15y
    Originally posted by David Beard:
    I take it you are after low-rate, long-term conventional financing and not commercial/portfolio financing.

    Can you take the loan in your personal name, then quit claim to your LLC? Are there concerns with triggering due-on-sale (very unlikely) or insurance policy issues, or what?

    Yes, we were looking at the low rates (at the time) with longer terms. We literally rotated through LLC members (all with high FICOs, all were accredited investors making it wasy) to get to FNMA 10 loan limits. The LLC transfer was approved by the lender. They (the lender) approved the loan package. How can they call it? There is no 'callable' issue per our closing attorney, accountant, and personal attorney. The only issue I see is that the LLC has a lot of equity in some of these loans. If our incumbent commercial lender would move to a 7 year call(balloon), we may refi them all and start the whole cycle over!

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Chris...Can you please describe what you guys did in more detail. I know you gave some cursory notes above, but this is something many on BP would like to learn how to do properly and will help the OP.

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    15y

    I'm not sure how much more I can add. Steve has good credit and great income. His LLC has material assets. I assume the LLC has a small membership. This scenario is much like what my membership and LLC experienced. The bank wanted the asset (collateral) deeded to the individual since the individual was the borrower. So the LLC, via company resolution, did a distribution of the asset to the individual and the individual then did a contribution of the asset and the net financing proceeds to the LLC. Each BP member should check with their own accountant and attorney about their particular circumstances.

    2Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y

    Thanks for your VERY informative posts Chris ... They have certainly helped, and have allowed me to better grasp some of this information. I'll take the info you shared and have my attorney take a look at it.

    And yes, you are correct. Our LLC is small. 2 Members :-) haha

    And lastly, yes, I am trying to take advantage of the excellent interest rates right now, so I figured while they were low, try and max out my mortgage's.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    15y
    Originally posted by Chris Martin:
    ... The closing attorney will provide two deeds as part of the closing package; one deed is LLC->Individual, the other is Individual->LLC. All documents are signed by the borrower as an individual. It is possible that the underwriter will want the first deed recorded a day before closing. No problem. The property is then deeded back to the LLC. No DOS/transfer issues and you can keep taxes in the LLC (1065), which is good to keep accounting costs down. Minor variations by lender, but that's the gist of it.

    If this were in the state of PA, those two deed transfers (and recordings) would EACH incur a bill for Real Estate Transfer Taxes (RTT is 2% to 4% depending on location in the state, and the state requires an imputed market value be used and not a $0 or $1 amount) - makes this a bit expensive to do in PA.

    Since OP is not in PA, he might not have that issue, but just in case I'm pointing it out.

    0Reply
  • Darryl Dahlen
    Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
    15y

    If you are buying in the Memphis, TN market, I have a bank for you.

    I made a call to someone I know who is in the banking business there, and as long as you're buying in Memphis, they can help you.

    1Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y
    Originally posted by Darryl Dahlen:
    If you are buying in the Memphis, TN market, I have a bank for you.

    I made a call to someone I know who is in the banking business there, and as long as you're buying in Memphis, they can help you.

    no longer really investing in Memphis -- Quality tenants outside of Sec 8 are few & far between. Between that and PM issues, I'm sticking to local deals (middle TN) now.

    Thanks for the offer though! They will lend to Memphis, but not the rest of TN? that seems a "bit" odd....

    0Reply
  • Darryl Dahlen
    Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
    15y

    I don't know why he said Memphis only.

    It might not hurt to reach out to my contact. You never know what might happen once you two talk.\

    PM me if you want his information.

    0Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y

    so far, I'm at 31 banks and counting. Have tried 31 banks in middle TN, and not a single one will allow an LLC .... They want the sole person on the loan. Tried some larger banks (suntrust, volunteer, etc....) and some smaller regional banks/CU's.

    ....sigh....

    0Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y

    Darryl - Colleague request w/ message sent! Lets hope he can make something happen!

    0Reply
  • Darryl Dahlen
    Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
    15y

    I replied to your email. Hopefully, my guy can help you out. He's certainly the right person to talk to so if he passes, he may be able to point you in the right direction.

    0Reply
  • Steve M.
    OP
    Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
    15y

    appreciate it Darryl!

    found a local (very small) regional bank that seems to be willing to work with me. Loaning on the LLC and taking other props as collateral. we'll see how this pans out

    0Reply
  • Mehran K.
    Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
    15y

    Nice Steve, keep us updated!

    0Reply
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