Hard Money as an individual or through an LLC

[Amanda Chandler]

I've seen some posts on the forum about hard money lenders "requiring" an LLC for them to loan money.
Can anyone share their experience borrowing hard money either through an LLC or as an individual?
Thank you in advance!

[George Despotopoulos]

Most require an LLC, fewer don't. The reason for requiring the LLC is usually driven by federal/state regulations/statutes. Basically, hard money lenders are usually exempt from licensure and also exempt from certain regulations due to the fact that the loan is for business or investment purposes. Since it's a business/investment purpose, the loan isn't subject to disclosures and other requirements. Lending to an LLC is more evidence that it's not a consumer loan.

Also, it's probably more beneficial to own the property in an LLC for asset protection, especially so when you're renovating and there's increased risk for injury/law suits pertaining to the work being done.

Usually anyone who owns 25% or more of the LLC will have their credit pulled. Some lenders have it that 51% or more owners will have their credit pulled. It varies by lender. If you have your credit pulled that usually means you're also giving a personal guaranty @ closing (basically you sign a document that states you're personally liable for the repayment of loan if the LLC defaults).